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 have a question regarding withholding taxes. we don’t belong to the top 10,000 corporation, are we not required to withhold?
thank you
Hi Weng. Business entities are required to withhold on specific income payments even if not a Top 20,000 corp. Example is 5% on rental, 10% or 15% on professional fees.
Hi, I just want to ask how to imposed EWT on Manpower Agencies? As I read from on other sources, 2% EWT should be on the gross receipts, is it correct? And other thing, where should VAT charges be imposed on the Manpower Agencies’ billing, is it on the TOTAL BILLING or on the AGENCY FEE only?
Thanks
Hi Sir,
My question lang ako regarding sa tax na dapat icompute sa aking ng company(local) na kumuha ng service ko bilang freelance programmer that work on a project base.
1. how much ang EWT rate applicable sa mga katulad ko para sa amount ng project ko?
2. subject ba ako sa VAT?
Badly needed your info.
tnx very much!
Your basically subject to pay the input vat if your client is a vat registered entity and ewt imposition varies on yearly income/gross receipts. You will be subject to ewt if the following conditions are met: 1 kung nag iisue ka ng oficial reciept(pag verbal lang di ka dapat i withheld, 2 if your annual income exceeds 720,000php .
Yes, its 2% based on gross receipts, unless its a security manpower services because 2% should be based on agency fees only. VAT is likewise based on gross receipts, but, exclude VAT for 2% EWT purposes.
Greetings!
Because of witholding tax, the philhealth professional fee that we receive gets an automatic deduction. Now because of the EWT, before I can receive my philhealth fee, I have to issue a receipt to philhealth. Is this not double taxation, tax deducted through the witholding and tax to be paid by me as I issue receipts to them
Hi I would like to know if gift cards and gift checks are subject to VAT upon sale of the GC to consumers? thanks
Hi, I just want to ask if we are required to withhold EWT on the professional fee
of our Consultant who is a Dutch citizen? We hired him for a short-term engagement. He lives in the Netherlands and he’ll just come here for a short-term engagement. If he is not subject to EWT, how he should be taxed? Thank you in advance for your help.
Good Day!
Just want to ask if how much will be dedcuted to me 2% or 10%, i’m a consultant as a programmer. And by the way i’m employed to a foriegn company pero as non-profitable dito sa pinas, parang satelite office lang nila dito.
Thanks in advance!
please enlighten me on the interpretation of ‘income payments”..thank you.
If professional fees (IT-technical) will be capitalized and be part of the cost of the asset, will there still be withholding tax?
Good afternoon! are payments to distributors of electricity (EXAMPLE: Davao Light, an Aboitiz Company)subject to expanded witholding taxes?
Good Afternoon,
Just want to ask if the billings of companies with Income Tax Holiday (ITH) should be deducted of EWT? If yes, should the EWT earned in the period of ITH be accumulated and credited as deduction to the company’s Income Tax Payable on the first year they are already subject to Corporate Income Tax (Period after ITH)?
Good day! Ask ko po kung may EWT po ba talaga ang payroll na ibinibill ko po sa client? Pass On lang po kasi yung arrangement ng business namin sa client. We just do the management of the people and they pay for the salaries of the employees. Fair po ba iyon? Thanks,
Che
I had two employers last year from Jan-May and May-Sept and last October I’ve started as a contractor for a small business. So from regular employee to a contractor status, how will I file my tax for 2012? Do I still need to register in BIR? Is this covered by expanded withholding tax?
Good day! Ask ko po kung may EWT po ba talaga ang payroll na ibinibill ko po sa client? Pass On lang po kasi yung arrangement ng business namin sa client. We just do the management and deployment of the people as per the requirements of our client. They pay for the salaries of the employees thru us. They deduct 2% from the total payroll ebrytime we bill them. I hope you can help me on this inquiry.
Thanks.
Hi! I am still quite confuse with the expanded withholding. need your advice on the situation below:
we rent vehicle from a car agency, when they submit invoice the billings consists of the following:
Vehicle rental:
Gas:
Toll Fees:
I just based the withholding tax on the cost of the vehicle rental. the gas and toll fees are being paid in full.
is this correct?
should I also deduct withholding tax form the gas and toll fees?
tahnks and more power
Hi Vic,
What’s the normal process in filing an amended 1601E? In our case, our staff placed “Company A” on the Alpha-list of Payees from whom taxes are withheld instead of “Company B”. And now, Company B is requesting for a 2307 but we cannot issue them as of the moment since we filed it to the wrong company? What do you think should we do?
Appreciate your help.
Best Regards.
Mike
Good pm. Our company had a letter from BIR certifying that we are Certified Withholding Agent. But since it was a years ago, it was misplaced and i cant find it.. I need it ASAP but i have no idea where to find it… or can i request for a new Certification from BIR? thank you.. hope you will help me,,
Anyone know if transportation expense(Jeepney,Bus,Tricycle,Taxi Fare,Toll Fees)is subject to withholding tax? any basis for this?
Also training allowance we given to our trainee employees.
I need answer asap.please help me.Thanks..
No its not, it can be used only for input tax credit to lessen the VAT to be paid.
Hi ,
May we ask if Pilotage is subject to expanded witholding tax ? What should we do if they are subject to witholding tax
Hi! I have a question about EWT. We are in a restaurant business, we have a client who reserved and dined with us for the first for a corporate dinner and the total billing is around 100K. The client belongs to 10,000 Top Corporations, my question is the Total Billing to them is subject to EWT even if this is the first and only transaction we had with them. I read somewhere that only “regular suppliers” are subject to
EWT. I cant consider us regular supplier because this is the first and only transaction we had with them this year. Please enlighten me, your prompt response will be greatly appreciated.
Thank You.
Hi Lorna,
Yes, you are required to file EWT if that is a Private Corporation and belongs to top 20,000.
May I ask also if what can you share about taxation for a hotel and restaurant co? what are the BIR forms filed? Thanks
Hello Vic,
What are the tax matters to be discussed for an 1.) Aircraft Manufacturing Co., 2.) Aviation School, & 3.) Hotel and Restaurant Co.
Thanks a lot Vic. God Bless.
hi mam. how do we tax insurance? thanks
Hi!
I am a newly hired bookkeeper of a newly established Domestic Corporation. I am currently dealing with Percentage tax, W/Tax on Compensation and EWT. We don’t have an Accountant (CPA) with whom I can work with and my boss only relies on me. This is also the first time that I handled a Philippine based company alone. I used to handle companies abroad which are all tax free. Here’s my question.. We paid our lawyer but its not on a regular basis. Should I still file and pay for the EWT of 10%?
Another concern is the computation of the Annual Income Tax Return. Can you guide me on the computation of corporate ITR. We are paying for percentage tax (non-VAT.
Your urgent reply will be highly appreciated.
Thanks…
You should still withhold expanding withholding tax from the professional – the lawyer. Computing your corporate tax is a long discussion. You may check our guide here. http://businesstips.ph/how-to-prepare-income-tax-return-corporation-partnership-philippines/
Gud am.. Hihingi lang po sana ako ng advice sa inyo….
Pano pa ang gagawin kung hindi nabayaran yung rental at services monthly… Tapos gusto na namin siya bayaran sa BIR..
Nakasaad po kasi sa BIR registration..
1. Expanded withholding tax
Pano po ang pwede namin gawin
Tutorial center po kami.. At Nagstart po ang operation namin last june2013…since that time hindi po kami nakapag withhold ng tax…
Sana po matulungan niyo kami…
Salamat po…
Hi,
I have a question regarding the appropriate tax to be charge to our foreign consultant for a specific renovation project. The project duration will be for 8 months.Currently, we are charging him 25% final withholding tax. However, given that he will exceed the 180-day period ,does that mean he will be considered as NRA-EBT? What would be the correct tax we need to withheld from him? Thanks
Vic,
we are paying our monthly rental for the office. In our monthly billing,the computation is breakdown separately for rental,electricity,repairs&maintenance. We do withholding on rental for 5%…the question is can we do withhold payments on electricity and repairs&maintenance for 2%??
Sir,
I would like to ask about the Withholding tax for Loans in the Bank. We loaned in the bank to purchase company cars payable for 5 years. the sales invoice issued by the supplier of the car is under our company name. monthly we are paying the bank for the principal of the loan and interest and the bank is the one paying the car company. where do we need to withhold taxes? We are claiming the depreciation expense of the car and also the input vat. the bir said we cant claim the both since we did not withhold taxes.
Hi Everyone,
Hope someone could still answer my question. We are actually conducting service trainings and seminars.. we pay free lance guest speaker/lecturer for the service. We are actually withholds tax on their fees as Professional though they haven’t have any licenses. My problem is, these people aren’t registered as Self- Employed Professionals thus they can not issue any ORs as a proof of payment. Can we still claim these as an expenses?
Sir,
I just want to know if the sale of gift checks subject to withholding tax?
Hi, are we required to claim an EWT for Professional Service of a foreign company. Thanks!
Hello Vic,
I just recently started working as an online English teacher for Japanese students, my contract is under a Japanese affiliated company here in the Philippines and who withhelds 15% expanded withholding tax from our meager salaries.
My question is, are we rightfully subjected to this tax? Are under the first provision “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.”?
Or are there any tax provisions or law that coveres online or homebased workers?
Appreciate your prompt reply 🙂
Berna
With Regards to comment from Bernadeth,
“Bernadeth June 23, 2012
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”
We also have the same scenario but we have opted a staggered payment(monthly) for the next year. May I know if we are to withheld the 1%/2% ewt in lump or withheld base on payment terms(e.g. monthly).
Good afternoon sir.
There was an over remittance of payments of my 1601e for this month cause i forgot that i made some accruals last december.Can I still claim my over payment and claim it the next month?
Please advise..thanks.
Sir this is the case:
A government agency is leasing an office space from a privately-owned building. The contract states that the lessee is to pay the lessor a monthly rental of 100 (that excludes the VAT of 12%). Now, per Accounting’s procedure they only withhold 5% for EWT and another 5% for EVAT Final upon payment to the lessor, so that’s a total of only 10 pesos deductions from the grossed up rentals of 112 pesos. As a result, the lessee is paying 102, 2 pesos higher than the contract price. Question, is this correct? What revenue regulations pertain to this situations? I hope you could shed light on this matter. Thanks in advance!
Hi! Do you guys still exist? I requested for a schedule of your tax seminars but never got a response. I also need to know if I am asked to be a management consultant, administrative building management, am I subject to percentage tax apart from the withholding tax? Thanks
Hi! I’m researching about taxes for my startup, home-based events business (sole proprietorship, VAT-reg). Technically, I’ll be working alone for now since I can’t afford to hire regular employees yet. But I will be “hiring” freelancers such sales and marketing people, designers, event coordinators, laborers, event staff, talents, etc (who are not legally registered as self-employed/mixed income earners) on a per project basis as often as necessary.
My question is, is it okay to hire freelancers and if so, should I withhold 10%/15% from their wages/talent fees for services rendered and then file/remit it as their EWT? Also, what sufficient documents should I prepare so I can declare the payment I made to them as a business expense (e.g. cash voucher, receiving form)?
Secondly, with the nature of the events business, I would also have to deal with different suppliers. Is it okay for me to transact with non-VAT as well as those suppliers who are not legally registered as a business? Also, are acknowledgement receipts from these suppliers considered as sufficient documents so I can declare it as a business expense? What would be its effect on my computation for VAT payable?
Thank you very much for your time and help!!!
Hi Sir,
What is the maximum period you can credit from your tax payable the amount of tax withheld ? Is 2012 expanded tax withheld can still be applied as deduction in our 2015 tax payable? Thank much.
hi there!
Thank you for posting such a helpful article. I have been searching thru the web and stumbled upon your post. Not sure if this is the right post to comment on but I would just like to ask how I can properly secure (BIR) OR, permits (?) for bazaar merchants?
We are a new organizers of bazaars and the like and we usually rent out venues for “tiangge” style selling. We issue ORs to venues but our merchants (who rents it out from us), usually don’t have their own COR yet (online shops/sellers). As per BIR rules, as an organizer, is it okay for us to “lend” them our own OR and just charge them for VAT or fees?
If this is not true, can you shed more light with our dilemma?
Thanks in advance and more power!
May I know if the monthly (subscription) fees of the User’s License per User and the use of Database of Ikonomikal Cloud Accounting Software are classified as VAT or EWT. Thank you in anticipation.
Hi Vic: May I know what is the responsibility of the withholding agent if the total taxes withheld per creditable tax certificates issued to payees do not match with the Alpha List. Coverage period is the same though.
Hoping for your assistance.
Best….Nona
Is there a ruling with regards to withholding of taxes on purchase of goods and services to non-resident and not engaged foreign corporation in the philippines?
Hi, do we have rulings regarding withholding of taxes on purchase of goods and services to non-resident not engaged in business in the philippines? Our company purchased goods from abroad, we are confused if we will deduct EWT from our payment to them. Thank you.
Hi Would like to ask. If Can I withhold 2% to a writer which his writings posted on my website. Some of my writers are not professional. How could I classify 10% professional Fee?
Hi to All,
Ask ko lang po sana kung aatend po ang electrical engineers ng event or seminars ilan po ba ang pwede nila i witheld? 15% po ba or 2% lang po? and bakit?
Hi Sir!
Good morning!
i just want to ask if the amount of over remitted expanded withholding tax can be offset on the next month’s payment?
Thank you so much.
Hi sir,
Are Google ads paid in US are subject to witholding taxes here in the Philippines?
im a retired government employee but was re-hired to take charge of a project. i was hired under contract and renewable every 6 months period. My services is paid by honorarium per month. I would like to know if my honorarium is still subject to tax.
and my contract does not create an employer and employee relationship.
Hi,
What about, I am not registered as an agent in a company but I market their service and they gave me a commission, am I subject to EWT? If yes, how much percentage it will be deducted to me.
Thank you. Hope to here you ASAP.