For practicality, common purchases of goods and services of affiliates and subsidiaries in a group of companies can be consolidated with one company by which the purchaser-company pays in advance the amounts of purchases in full, withholds and remits the applicable withholding tax and issues the withholding tax certificate.Though invoice or official receipt is in the name of the purchaser-company, it only records in its books as expense or asset its actual share in the common purchases. Then as well the other affiliates and subsidiaries recognize assets and expenses only to the amount of their respective shares.
The common purchases are not income to purchaser-company and, so, not subject to income tax and, therefore, to withholding tax.
Besides, withholding and remittance of the purchaser-company for its accounts on payments made to the common suppliers shall establish substantial compliance with the withholding tax requirements under the regulations, RR 2-98 as amended by RR 30-03.
References: Bureau of Internal Revenue (BIR) Ruling No. DA-507-2006, August 22, 2006; http://www.punongbayan-araullo.com (tax brief)
