Withholding Tax Agents

Duties and
Responsibilities
Marie Fe F. Dangiwan
Tax Director

Kyle Mikko C. Agustin

Tax Compliance Senior

October 08, 2021

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Course outline
1. Withholding tax on compensation
2. Expanded withholding tax
3. Final withholding tax
4. Final withholding VAT

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Nature of withholding tax

Withholding tax is NOT a tax.

It is a method of collecting the income tax.

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Purpose/s of withholding

1. Convenient manner to meet the taxpayer’s probable

income tax liability
2. To ensure the collection of the income tax
3. To improve the government's cash flow

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Types of withholding taxes

1. WITHHOLDING TAX ON COMPENSATION AND

CREDITABLE/EXPANDED WITHHOLDING TAX (WTC/EWT)
• Estimated tax due withheld at source upon payment
• Tax is credited against the final tax liability (of payee) determined
upon filing the return

2. FINAL WITHHOLDING TAX and WITHHOLDING VAT (FWT)

• Full payment of income tax and VAT due
• Liability is final; the payee has no further obligation to file an ITR
and/or pay additional tax and remit VAT
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PERSONS REQUIRED TO WITHHOLD
WITHHOLDING TAXES

• Individuals engaged in business or practice of profession

• Non-individuals (corporations, associations, partnership,
cooperatives) whether engaged in business or not

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 Withholding Tax on Compensation
RR No. 08-2018 ; RR 11-2018

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Withholding tax obligations of an employer

1. To register as withholding agent

2. To withhold the correct amount of tax
3. To timely file and pay with the BIR, file the annual information return
and alphabetical lists.
4. To refund excess withholding on the compensation of their
employees
5. To issue the corresponding certificates of taxes withheld

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Poll question 1: Timing of withholding tax

When is the timing of remittance of withholding tax on compensation?

1. Upon payment
2. Upon accrual
3. Upon payment, or payable, or accrual whichever is earlier

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Poll question 1: Timing of withholding tax

When is the timing of remittance of withholding tax on compensation?

1. Upon payment
2. Upon accrual
3. Upon payment, or payable, or accrual whichever is earlier

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Timing of withholding tax – RR 2-98, as
amended
“SECTION 2.79. Income Tax Collected at Source on Compensation
Income.

(A) Requirement of Withholding. — Every employer must withhold from

compensation paid an amount computed in accordance with these
Regulations.”

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Timing of withholding tax - SC

When to withhold accrued bonuses

(Ing Bank NV, G.R. 167679 July 2015)

Facts
In the case of Ing Bank N.V., the petitioner-taxpayer maintains its
position that the liability of employer to withhold the tax does not arise in
the respective year of accrual, 1996 and 1997, until such bonus is
actually distributed in the succeeding year.

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Timing of withholding tax - SC

When to withhold accrued bonuses

(Ing Bank NV, G.R. 167679 July 2015)
The SC rules:
the petitioner-taxpayer is liable for the withholding tax on the bonus at
the time of accrual and not at the time of actual payment.
absolute or exact accuracy in the determination of the amount of the
compensation income is not a prerequisite for the employer’s withholding
obligation to arise.

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 Scope of Taxable Compensation

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Gross compensation defined

All remuneration received for services performed by an employee for his

employer under an employer-employee relationship.

- Section 2.78.1(A), RR 2-98, as amended

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Scope of compensation income

• Salaries and wages

• Taxable allowances and benefits
• Other forms of compensation for labor or personal services performed
under employer-employee relationship

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 Poll question 2
Do you subject the below benefits to withholding tax?

1. Fixed meal allowance in the amount of P2,000 per month

2. Bereavement assistance amounting to P10,000 for the death of
an immediate family member

Choices:
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No

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 Poll question 2
Do you subject the below benefits to withholding tax?

1. Fixed meal allowance in the amount of P2,000 per month

2. Bereavement assistance amounting to P10,000 for the death of
an immediate family member

Choices:
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No

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 Additional Knowledge Check
Do you subject the below benefits to withholding tax?

1. Calamity assistance ranging from P5,000 to P20,000

2. P10,000 and P15,000 for normal and caesarean delivery,
respectively

Choices:
a. Yes, Yes
b. Yes, No
c. No, Yes
d. No, No

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 Knowledge Check
Do you subject the below benefits to tax?
✓ Personal life insurance shouldered by the Company specific to
an employee
✓ Employee achievement awards for long service and outstanding
performance in the form of gift checks of P10,000
✓ Foregone interest on interest free loans

Choices:
a. All yes
b. All no
c. Some are yes, some are no

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 Exclusions from gross income

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 Exclusions from gross income

- De minimis Benefits

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General rule on tax treatment of de minimis benefits

benefits shall not be included in the

Facilities or privileges computation of P90,000 threshold under
considered as de minimis Section 32(B)(7)(e) of the Tax Code
benefits which conform to
the prescribed ceiling are
not subject to FBT & no withholding tax shall be imposed in
INCOME TAX ON view of their exclusion and exemption
COMPENSATION. from tax

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De minimis Benefits

Type of
De Minimis Threshold
allowance
• Monetized Unused Not exceeding 10 days
vacation leave credits
• Daily meal allowance for 25% of the basic minimum wage on
overtime work and per region basis
night/graveyard shift
• Actual yearly medical P10,000/year
assistance
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De minimis Benefits
Type of allowance De Minimis Threshold
• Laundry allowance P300/month
• Gifts (Christmas and P5,000/year
major anniversary
celebrations)
• Employees P10,000/year and must be tangible other than
achievement award cash/GC
• Productivity Incentives P10,000 per year and received by an
employee by virtue of a collective bargaining
agreement (CBA) and productivity incentive
schemes

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Update on De minimis Benefits
(RR No. 08-2018)

Before After
• Uniform and clothing • Uniform and clothing allowance
allowance (P5,000 per (P6,000 per annum)
annum)
• Rice subsidy (P1,500 per • Rice subsidy (P2,000 per
month) month)
• Medical cash allowance to
• Medical cash allowance to
dependents of employees
dependents of employees
(P1,500 per semester/P250
(P750 per semester/P125 per
per month)
month)
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Update on De minimis Benefits (RMC 50-2018)

What shall be the tax treatment of the de minimis benefits given to employees
which are beyond the prescribed amount of benefits?

The benefits given in excess of the maximum allowed as de minimis benefits shall be
included as part of “other benefits” which is subject to the P90,000 ceiling. Any amount in
excess of the P90k shall be subject to income tax, and consequently, to the withholding tax
on compensation.

Example: Ms. A received annual clothing allowance amounting to P10,000. Her 13th month
pay is P80,000. No other benefits were received for the entire year.

In this case, since the prescribed maximum amount for clothing allowance in only P6,000,
the excess of P4,000 shall be added to the 13th month pay, thereby the entire benefits
received amounted to P84,000. In this scenario, the same shall still be exempt from
income tax since the ceiling amount for these other benefits is P90,000

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 Update on De minimis Benefits (RMC 50-2018)
Benefit
Listed as
de minimis?
Yes No

Within the threshold? Other benefit?

Yes No (excess) Yes No

Within 90,000?

Yes No

Exempt Taxable

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 Taxation of Minimum Wage Earners

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Minimum Wage Earner (MWE)

– Exempt from income tax on the ff:

• Basic minimum wage Still exempt even if
total is beyond
• Holiday/Overtime pay P250,000
• Night differential/Hazzard pay* (RR No. 08-2018)

- Taxable income shall be subject to withholding tax

using the tax table (exempt on the first P250k)

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Minimum Wage Earner (MWE)

Tax Treatment per RR No. 11-2018

Minimum Wage Earner Still RR 11-2018
exempt even if
SMW + (holiday, overtime, hazard & night-shift total isExempt
beyond
differential pay) + de minimis benefits within P250,000(entire
ceiling and/or other benefits not exceeding (RR No. 08-2018)
earnings)
90,000
SMW + (holiday, overtime, hazard & night-shift Exempt
differential pay) + de minimis benefits beyond Taxable only
limit and/or other benefits over P90,000 ceiling on excess
over P90k

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Minimum Wage Earner (MWE)

Tax Treatment per RR No. 11-2018

Minimum Wage Earner RRexempt
Still 11-2018even if
SMW + (holiday, overtime, hazard & night- total is beyond
shift differential pay) + de minimis benefits + Exempt
P250,000
commission & other taxable allowances Taxable only on commission
(RR No. 08-2018)
and other taxable
allowances

SMW + Business income Exempt

Taxable only on business
income

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 Compensation Income
Illustration 1: (Purely Minimum Wage Income Earner)
Employee: Mr. C, a minimum wage earner

Basic Minimum Wage P 225,000

Overtime, night shift differential, P 40,000
hazard pay, and holiday pay
SSS/PHIC/HDMF Contributions P 5,000
Rice Allowance P 24,000

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Illustration 1: (Purely Minimum Wage Income Earner)

Gross Compensation Income* ₱ 294,000.00

Less: Rice Allowance 24,000
SSS/PHIC/HDMF 5,000
Taxable Compensation Income ₱ 265,000
Tax Due EXEMPT

*The basic minimum wage as well as holiday pay, overtime pay, night differential and
hazard pay received by such MWE are specifically exempted from income tax under the
law.

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 Compensation Income
Illustration 2: (Minimum Wage Income Earner with other
income from the same employer)
Employee: Ms. D, a minimum wage earner
Basic Minimum Wage P 175,000
Overtime, night shift differential, P 65,000
hazard pay, and holiday pay
SSS/PHIC/HDMF Contributions P 5,000
Rice Allowance P 24,000
Commission income P25,000

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Illustration 2: (Minimum Wage Income Earner with other income
from the same employer)
TRAIN
Gross Compensation Income ₱ 294,000.00
Less: Basic Minimum Wage 175,000
Overtime, hazard, night differential and holiday pay 65,000
SSS/PHIC/HDMF 5,000
Rice Allowance 24,000
Taxable Compensation Income ₱ 25,000
Tax Due [Not over P250,000 (P25,000 x 0%)] -0-

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 Compensation Income
Illustration 3: (Mixed Income Earner)
Employee: Mrs. E, a minimum wage earner
and a part-time real estate agent

Basic Minimum Wage P 155,000

Overtime, night shift differential, hazard P 35,000
pay, and holiday pay
Commission income (from real estate dealings) P400,000

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 Compensation Income
Illustration 3: (Mixed Income Earner)

Basic Minimum Wage P 155,000 Exempt from

Overtime, night shift differential, 35,000 withholding tax on
hazard pay, and holiday pay compensation
Commission income (from real estate 400,000 Subject to applicable
dealings) rules of EWT

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 Fringe Benefit Tax
RR 08-2018 ; RR 11-2018

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Coverage (taxable fringe benefits)

• Housing privilege
• Expense account
• Vehicle of any kind
• Household personnel
• Interest on loan at less than market rate
• Membership fees, dues, other expenses in social and athletic
clubs and similar organizations (except membership in
business associations, DA-278-03, August 22, 2003)

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Coverage (taxable fringe benefits)

• Expenses for foreign travel

• Holiday and vacation expenses
• Educational assistance to employee/dependents
• Life or health insurance and other non-life insurance premiums

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Non-taxable FBT

• Benefits required by the nature of or necessary to the

trade/business

• Benefits granted for the convenience or advantage of the

employer

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 FBT Rate
Gross Monetary Value =

Monetary Value
35% 65%
• 35% if subject to the graduated rates (citizen, resident alien, non-
resident alien engaged in trade or business)
• 25% in case of NRANETB

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 Illustration
Employer A purchased a residential house and transferred ownership to
Employee B, a resident citizen. The acquisition cost of the property is
P1,000,000.

FBT computation:
GMV = Monetary Value (MV) of the Benefit / (100% - 35%)
= P1,000,000 divided by 0.65
= P1,538,461.54
FBT = GMV x FBT rate
= P1,538,461.54 x 35%
= P538,461.54
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Common issues on compensation during
BIR audit

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 Common issues on compensation

1. Differences noted in the amount of payments of

compensation recorded in the books against reported in the
returns.
- Amount per books > than per return
- Amount per books < than per return

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 Common issues on compensation

2. Allowances will not be subjected to WTC/FBT if

receipted in the name of the Company and for the
furtherance of the business of employer
Examples:
• Cellphone/load allowance

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 Common issues on WTC

3. Fixed or variable allowances subjected to WTC

GENERAL RULE:
Fixed or variable transportation, representation and
other allowances, fixed for his position either as
advances or reimbursements, are considered
compensation subject to withholding tax.

- Sec. 2.78.1(A)(6)(a) of RR No. 02-98, as amended

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Poll question 3

Are work-from-home expenses incurred by employee, e.g.

load/internet, swivel chairs, camera used for conferences,
etc. receipted in the name of employer subject to withholding
tax on compensation/FBT?
Choices:
1. Yes
2. No

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 End of WTC presentation

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 Creditable/Expanded Withholding Tax (C/EWT)
(RR No. 11-2018)

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Question

Are income payments to suppliers through employees (e.g. payment

for notary fees/professional fees) subject to EWT?
• Generally, yes, because it is the Company who ultimately
claims the expense
• No, because the Company does not have control of payment

A21. Yes, the reimbursable expenses are subject to EWT, provided that the sales
invoice/official receipt shall be in the name of the company and the
corresponding BIR Form No. 2307 is issued by the Company (RMC 72-04)

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Persons authorized/required to withhold

If a holding company/related company allocates an expense to your

company, is it subject to EWT?

Yes. Where the payor only shoulders a portion of the payment,

he shall only withhold on the portion of the expense being
shouldered by him.

Revenue Regulations No. 30-2003

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Persons authorized/required to withhold

• Payments made through brokers and agents authorized to

receive payments shall likewise be subjected to withholding
tax, if applicable. The certificate of taxes withheld should be
issued in the name of the payee whom the agent represents.

Revenue Regulations No. 30-2003

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Expanded withholding tax

Applicable only to domestic suppliers

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Top withholding agents (RR 11-2018)

Top Withholding Agents (previously Top 20k Corporations/5k Individuals)

• Taxpayers classified and duly notified by the Commissioner as
such
o Large taxpayers
o Top 20,000 corporations
o Top 5000 individuals

• Identified Medium Taxpayers and those under Taxpayer

Account Management Program (TAMP)

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New Top withholding agents (RR 11-2018)

Top Withholding Agents

Additional top withholding agents shall be published
in newspapers or in the BIR website. This shall serve
as their “notice” as top withholding agents.

The obligation to withhold starts on the first day of the

month following the month of publication.

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Poll Question 4

When is the timing of withholding of expanded and final withholding

tax?
1. Upon payment
2. Upon accrual
3. Upon payment, or payable, or accrual whichever is earlier

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Poll Question 4

When is the timing of withholding of expanded and final withholding

tax?
1. Upon payment
2. Upon accrual
3. Upon payment, or payable, or accrual whichever is earlier

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Timing of withholding tax

Sec. 2.57.4. Time of withholding. — The obligation of the payor to

deduct and withhold the tax under Section 2.57 (FWT & CWT) of
these Regulations arises at the time an income payment is paid or
payable, or the income payment is accrued or recorded as an
expense or asset, whichever is applicable, in the payor's books,
whichever comes first.

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Timing of withholding tax

Provided, however, that where income is not yet paid or payable but
the same has been recorded as an expense or asset, 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.

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 Timing of withholding tax
WITHHOLD HERE

accrued accrued accrued

October November December

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Applicable withholding taxes for domestic
suppliers

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Expanded Withholding Tax (RR 11-2018, RR 14-2018)

Non-individual Apply withholding

(Corporate) tax rules
Lone income payor and
With sworn declaration:
0%
Payee

Gross Income Without sworn declaration:

Individual ≤ P250K apply withholding tax
rules
Payee

Gross Income Apply withholding

exceeds >P250K tax rules
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Exempt Payees for C/EWT
Individual payee is initially exempt from withholding tax but if
income payment exceeds P250k during the year:
• The P250,000 is still exempt from withholding tax
• The amount in excess of P250,000 shall be subject to
withholding tax
• If the individual failed to submit sworn declaration to the
lone income payor/withholding agent, the income
payment shall be subject to withholding tax even though
in a taxable year, the income payment is P250,000 and
below

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 Poll question 5
Illustration 1
Mr. M, a courier, to lone client GOD Collection Services,
failed to execute sworn declaration. Fee is P230k during
the year. Is it subject to EWT? If yes, HM?

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 Poll question 5 answer

Even though lone income payor and fee did no exceed

P250k, but since no sworn declaration, subject to EWT

2018 Gross receipts P230,000

Multiply by: EWT rate 2%
Amount of withholding tax P 4,600

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 Expanded Withholding tax
Illustration 1
When do we subject the previous case to EWT?

a. Subject to withholding tax at the time of

accrual/payment
b. Subject at the end of the period if he really did not
execute sworn

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 Expanded Withholding tax
Illustration 2
Ms. T, supplier of cupcakes to lone customer RPSV
Supermarket, executed a sworn declaration of gross receipts.

Ms. T’s expected income in 2018 < P250,000

per sworn declaration
Actual income in 2018 300,000

How much is EWT?

a. P0. Ms. T will pay her tax on her ITR
b. P3,000
c. P500
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 Expanded Withholding tax
Illustration 2

2018 Gross receipts P300,000

Less: Amount not subject to
withholding tax 250,000
Income subject to withholding tax P 50,000
Multiply by EWT rate 1%
Amount of withholding tax P 500

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 Professional, Talent Fees, etc. for services
rendered
(RR No. 11-2018)

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Expanded Withholding Tax on Professional fees
(RR 11-2018, as amended by RR 14-2018)

Who are considered professionals, talents, etc.

1. Individuals engaged in the practice of profession or calling requiring

government licensure examinations and/or regulated by the Professional
Regulations Commission, Supreme Court, etc.
2. Professional entertainers, such as, but not limited to, actors and
actresses, singers, lyricists, composers and emcees.
3. Professional athletes including basketball players, pelotaris and jockeys;
4. All directors and producers involved in movies, stage, radio, television and
musical productions;

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Expanded Withholding Tax on Professional fees
(RR 11-2018, as amended by RR 14-2018)

Who are considered professionals, talents, etc.

Director-employees
subject to
5. Insurance agents and insurance adjusters; withholding tax on
6. Management and technical consultants; compensation
7. Bookkeeping agents and agencies;
8. Other recipients of talent fees;
9. 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;

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Expanded Withholding Tax on Professional fees
(RR 11-2018, as amended by RR 14-2018)
Who are considered professionals, talents, etc.

Previously subject to 10% as commissions

10. Brokers and agents [formerly under letter (G) of RR 2-98]; and
11. Commissions of independent and/or exclusive sales
representatives, and marketing agents of companies [formerly
under letter (O) of RR 2-98].

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Expanded Withholding Tax on Payments to Partners of
GPP

Payee RR 2-98 RMC RR 11-2018

1-2018
Partners of GI < P720K: 10% 8% GI < P720K: 10%
GPP GI > P720K: 15%

GI > P720K: 15%

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CWT rate on professional, talent fees,
commissions
Payee RR 11-2018

Individual Payee GI < P250k with sworn declaration: 0%

GI < P3M with sworn declaration: 5%
GI > P3M or VAT Registered Payees: 10%

Non-individual Payee GI < P720K with sworn declaration: 10%

GI > P720K: 15%

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Expanded Withholding Tax on Payments to Professionals
(RR 11-2018, as amended by RR 14-2018)
Lone payor with sworn declaration: 0%

Gross Income
≤ P250K Not lone payor, or lone payor w/out
sworn declaration: 5%/10%

With Sworn
Individual Declaration: 5%
Non-VAT
Registered
Payee W/out Sworn
Gross Income Declaration:10%
≤ P3M
VAT
10%
Registered

Gross Income
10%
> P3M

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Expanded Withholding Tax on Payments to Professionals
(RR 11-2018, as amended by RR 14-2018)
With sworn declaration:
10%
Gross Income
Payee
≤ P720K
Non- Without sworn declaration:
individual 15%
(Corporate)

Gross Income 15%

exceeds P720K

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Compliance Requirement

Income Payee

Sworn Declaration of Gross Receipts/Sales*, together with

BIR Certificate of Registration (COR) shall be submitted to the
income payor on or before January 15 or prior to initial payment
of income during the year

*No longer required to be received by/submitted to the BIR.

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Compliance Requirement

Withholding Tax Agent/Income Payor

Income Payor/Withholding Agent’s Sworn Declaration
❑ Individual payees
• not subjected to withholding tax
• subjected to 5% withholding tax
❑ non-individual payees subjected to 10% withholding tax

List of Individual Payees.

The withholding agent shall submit the above documents to the BIR
• on or before January 31 of each year,
• or 15 days following the month when a new income payee has
submitted sworn declaration of gross receipts/sales.

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 Common issues on brokers, travel agents,
reimbursements, and persons exempt from
income tax

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 Common issues on: Freight forwarders, brokers and similarly
cases (RMC Nos. 35-2006 and 09-2006)

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Reimbursement

Third party
Utilities/facilties Company A Ph
Legal fes

Company B Japan
Company B Japan
customer

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Knowledge Check

Are income payments to suppliers through employees (e.g. purchase

of employees of supplies from National Book Store) subject to EWT?
• Yes, because it is the Company who ultimately claims the
expense
• No, because the Company does not control the payment

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Common issues: Reimbursements

As a consultant, what would you advise the Company’s management to

minimize tax assessment for failure to withhold on reimbursement?

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Common issues: Reimbursements

a. Identify regular suppliers whom the employees can purchase on behalf of

the Company and make arrangements with the suppliers that the billings
and payment shall be made by the Company, and therefore, the
applicable EWT could be withheld; or

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Common issues: Reimbursements

b. Evaluate the benefits of issuing corporate credit cards to selected

employees with credit limits which is also the same with the maximum
amount the employee could reimburse.

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Common issues: Reimbursements

c. For transportation/meal allowances – opt to shoulder the withholding tax.

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Common issues: Exempt entities from Income Tax

Concerned withholding tax agents shall require all individuals and entities
claiming such exemption to provide a copy of valid, current and
subsisting tax exemption or ruling before the payment of related income.

The tax exemption certificate or ruling must explicitly recognize the grant of
tax exemption, as well as the corresponding exemption from withholding
tax.
RMC 8-2014

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Common issues: Exempt entities from Income Tax

Failure on the part of the taxpayer to present such shall subject him to the
payment of appropriate withholding tax due on the transaction. Failure on
the withholding tax agent shall cause imposition of penalties.

RMC 8-2014

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Knowledge check:

Exempt entities from Income Tax

What should you do if the entity is non-stock-non-profit which is
exempt from withholding tax, but have not validated its tax
exemption?

Choices:
1. Subject it to EWT
2. Subject it to EWT on the last month of the taxable year if it’s still
accrued
3. No, assume the risk of deficiency EWT

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 Update on Reportorial requirement

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Withholding Tax Returns filing and payment
Covered Form to Use Alphalist of Payees Due date for filing & payment
Period
Non-EFPS Filers EFPS Filers
1stmonth of BIR Form 0619E/F None 10th day of the 11th to 15th day
the quarter • ATC – MC 200 following month of the following
• Tax Type – month (RMC
WE/WF 50-2018)
2nd month of BIR Form 0619E/F None 10th day of the
the quarter • ATC – MC 200 following month
• Tax Type –
WE/WF
Calendar BIR Form 1601EQ, Yes – Last day of the Last day of the
Quarter 1601FQ,1602, 1603 1601EQ/1601FQ month following month
(to include all income the close of the following the
payments for the quarter close of the
quarter) quarter

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BIR Form 1601-EQ

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BIR Form 1601-EQ

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Quarterly Alphalist of Payees (QAP)

❑ To be submitted on or ❑ Information required:

before the last day of • Name of income payees;
the month following the • TIN;
close of the quarter. • Income paid per month, with
total for the quarter; and
• Total amount of taxes
withheld, if any.

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Knowledge Check

Security agencies (RMC 39-07)

1. Company paid security agency P100,000, P80k of which pertains to
salaries of security guards.
a) What is the amount subject to EWT?
b) Is this classified as service or contractor?
c) Do you require specific documents from the security agency?
What are those?

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security agencies (RMC 39-07)

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Common issues during BIR audit

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Common issues during BIR audit
Disallowance of expense from gross income of taxpayer

Sec. 40 of the Tax Code: Expense is nondeductible if not subjected to

applicable withholding tax

RR 14-02 (2012 and below) and RR 6-18 (2018): Expense not subjected to
withholding tax is deductible if taxpayer paid deficiency withholding tax at the
time of audit investigation, reinvestigation/reconsideration.

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 Final withholding tax

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Income Payments to non-residents subject
to Final Withholding Tax
A. Basic Principles
– Overview of taxation of non-residents

B. Situs of income

C. Tax treatment of certain income payments to non-residents

– Final withholding of income tax
– Final withholding VAT

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Taxability of non- Non-residents are
Taxable in the
residents Philippines only on
Philippine-sourced
income.

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Philippine Sourced Income
Income Situs/taxable income in Ph

Interest Interest bearing obligation of Ph residents

Dividend Received from domestic or foreign corporation
Royalties If the property is used in Ph. copyright, patent, designs,
trademark, brand
Rent From properties located in the Philippines
Services For performance in the Philippines
Shares Shares of stocks of domestic corporation

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Philippine Sourced Income

Taxable in the
Philippines only on
Philippine-sourced
income.

Subject to FWT since

they are not required to
FCs file tax returns in the Aliens
Philippines.

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Philippine Sourced Income

In general, payee not required to report the income in or file an

income tax return

Full and Final payment from the

payee of his income tax on said Liability to remit is on the
income withholding agent

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Sample transactions subject to FWT

Deposits - Bank as the Depository

Mr. X, a Filipino resident, deposited P1M at 4% interest rate per

annum at Bank ABC.

INTEREST
EXPENSE ?

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Deposits

Interest Expense

Subject to CWT? Subject to FWT?

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Rates of FWT (general rules) on Peso
Deposits:
20%
• Individual Citizen
• Resident Alien or Non-resident Alien engaged in trade or business in
the Philippines
25% - Non-resident Alien not engaged on trade or business in
Philippines
20% - Domestic Corporation and Resident Foreign Corporation
25% - Non-resident Foreign Corporation

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 Withholding VAT

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Withholding of VAT on payments to
Non-Residents

VATable payments to
Non-Residents:

Lease or use of properties or property rights owned

by non-residents;

Other services rendered in the Philippines by non-

residents.

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Withholding of VAT on payments to
Non-Residents

Nature of Transaction Subject to Subject to

FWT? WVAT?

Contract for services done

partly offshore and onshore

Onshore Onshore

May be exempt from income

tax withholding pursuant to
treaty provisions

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Timing of Withholding – Final taxes
WHICHEVER COMES

1st

Paid Payable Accrued

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Knowledge Check

When do you withhold on dividends?

1. Date of declaration
2. Record date
3. Payment date

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 Withholding VAT Monthly Remittance Return

When to withhold?

At the time of payment

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 End of presentation

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