In Section 2 of Revenue Regulations No. 12-2013 - Amendment. - Section
2.58.5 of RR 2-98, is hereby further amended to read as follows:
"Sec. 2.58.5. Requirements for Deductibility. - Any income
payment which is otherwise deductible under the Code shall be allowed as a
deduction from the payor's gross income only if it is shown that the income tax
required to be withheld has been paid to the Bureau in accordance with Secs. 57
and 58 of the Code.
No deduction will
also be allowed notwithstanding payments of withholding tax at the time of the
audit of investigation or reinvestigation/reconsideration in cases where no
withholding of tax was made in accordance with Secs. 57 and 58 of the
Code."
However, Revenue Memorandum Circular no. 63-2013 was issued to clarify RR No. 12-2013 (dated
11 July 2013), which amends the requirements of deductibility of certain income
payments under Section 2.58.5 of RR 2-98 as amended. As stated in RR No.
12-2013, no deduction will be allowed notwithstanding payments of withholding
tax at the time of the audit investigation or reinvestigation/consideration in
cases where no withholding of tax was made in accordance with Secs. 57 and 58
of the Code. In this regard, it is hereby clarified that the provisions of RR
No. 12-2013 shall apply to audit investigation for taxable year 2013.
REIMBURSEMENT OF EXPENSES OR COST
Payments made by the Company to their Officer and Employees as reimbursement of expenses/cost or liquidation of advances are not considered as income payment. The ordinary, necessary, business transactions related to
the operations of the Corporation are considered as REIMBURSEMENT OF COST AND NOT INCOME but just a RETURN OF CAPITAL, and thus, is not subject to Withholding Tax and Income Tax in the Philippines.
CASUAL PURCHASE INVOLVING A SINGLE TRANSACTION OF LESS THAN TEN
THOUSAND PESOS (PHP10,000.00); NON-REGULAR SUPPLIER OF GOODS & SERVICES AND
OTHER EXPENSES
In general, income payment made by Top twenty thousand (20,000) private corporations, as determined
by the Commissioner under Revenue
Regulations No. 14-2008 to their regular purchases to its local/resident suppliers of goods and services are subject to Expanded Withholding Tax [Services-2% & Goods-1%]. But, casual purchase of goods and services, that are, purchased made from a
non-regular supplier and oftentimes involving a single purchase of less than
Ten thousand pesos (P10,000.00) and has not transacted at least six (6)
transactions, either in the previous year or current year, are not subject to
withholding tax.
In general, the
following payments made by Top 20,000 corporations are exempt from withholding tax in the Philippines: Payments that does not constitute income on
the part of the payee (ex. Reimbursable expenses), Payments to government
agencies, payments to income tax exempt entities.
PROFESSIONAL FEES
Under existing
Revenue Regulations, stated that Professional
fees of services rendered by Individuals and Corporations on the Gross
Professional Fees are subject to Creditable
Withholding Tax of Fifteen percent (15%), if the gross income for the current
year exceeds P720,000; and Ten percent (10%), if the gross income for the
current year is P720,000 and below. However, Income payments made to General Professional Partnerships (GPP)
are not subject to Withholding Tax. [Revenue Memorandum Circular No. 3-2012 –
“SECTION 2.57.5 (4)]; Section 26 of the National Internal Revenue Code (NIRC)
of 1997, as amended.
Those taxpayers who are not among of the top 20,000 corporations or mentioned in RR No. 14-2008 are not required to comply as stated in the regulations. However, taxpayers are required to comply with the requirements of deductibility of income payment mentioned in the National Internal Revenue Code as amended and other existing revenue regulations.
