Top Withholding Agents Who Are Obliged to Remit 1% and 2% Creditable Withholding Taxes

As part of ease of doing business, the bureau has issued Revenue Memorandum Circular (RMC) No. 143-2019 dated December 16, 2019 for the clarifications on the inclusion of Taxpayers as Top Withholding Agents who are obliged to remit the 1% and 2% Creditable Withholding Taxes Pursuant to the Criteria of Revenue Regulations (RR) No. 7-2019.

It is clearly stated in the regulations that it should be observed in the revenue regulations (RR No. 12-94; RR No. 17-2003; RR No. 14-2008 and RR No. 6-2009) that the obligation to withhold and remit these CWTs to this Bureau is mandated only to those taxpayers whose business operations have a significant level of economic impact contributory to the collection of revenues. Under this perspective, more potential revenues can be detected and collected by this Bureau through the other stakeholders and business partners of these taxpayers. Based on this rationale that RR No. 7-2019 was issued in order to simplify the criteria for the selection of Top Withholding Agents (TWAs), which were introduced by RR No. 11-2018.

Further, in implementing the said Regulations and consistent to the policy of ease of doing business by ensuring that the list of TWAs only reflect taxpayers who are complaint to the prescribed criteria of RR No. 7-2019, Operations Memorandum (OM) Order No. 20-2019 was issued by the Deputy Commissioner for Operations Group to all Regional Director's and Revenue District Officers. The OM excludes the following taxpayers in the identification of TWAs although they have satisfied the prescribed criteria of the said RR:

a. National government agencies. government-owned controlled corporations. state

universities and colleges. and local government units:

b. Taxpayers who were included because of one-time  transactions (i.e. estate and donor's tax);

c. Individual taxpayers deriving income on commission basis such as but not limited to insurance agent, and real estate broker, subjext to verification of their duly-filed 2018 Quarterly Income Tax Returns (BIR Form No. 1701Q) in order to determine the regularity of their transactions. Accordingly, if the P12M criteria has been satisfied only in one (1) taxable quarter, the taxpayer shall not be qualified as TWA; and

d. Taxpayers who are tax exempt from payment of income taxes with no proprietary activities (i.e. foundations. non-stock. non-profit and tax exempt educational

institutions, religious and charitable institutions. etc.).

On the basis of the above discussions and clarifications, in cases of publication of TWAs in the newspaper of general circulation wherein certain taxpayers are included or not deleted in existing list of TWAs but do not satisfy the criteria of RR No. 7-2019, or if they may have satisfied the same but qualify as taxpayers enumerated in OM No. 20-2019 who should be excluded from the list of TWAs, these taxpayers cannot be compelled to withhold the 1% and 2% CWTs.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/RMC%20No.%20143-2019.pdf of the full text of RMC No. 143-2019.

New eBIRForms Package v7.5 is now available for download

As part of the ease of doing business in the nation, the bureau has announced the update of new eBIRForms Package from eBIRForms Package v7.4.2 to  eBIRForms Package v7.5  and to download click the link below:

New eBIRForms Package v7.5: http://ftp.pregi.net/bir/ebirforms_package_v7.5.zip

The new eBIRForms Package v7.5 was issued to upgrade and update other forms for the benefits of all who are using the platform in filing taxes with ease and convenience.

New Format for the Notice to the Public to be Exhibited at Place of Business

Taxpayers will get intrigued about the new regulations recently issued by the bureau and this is related to the New Format for the Notice to the Public to be Exhibited at Place of Business. Revenue Regulations (RR) No. 10-2019 is issued amending pertinent provision of RR No. 4-2000, as amended by RR No. 7-2005, By Providing  a New Format for the Notice to the Public to be Exhibited at Place of Business.

It stated in Section 2 of the regulations which refers to Exhibition of Notice at Place of Business with purpose as follows: 

For the purpose of improving revenue collection through enforcement of the legal, provision on the issuance of official receipt (OR)/soles invoice (SI) and to inform the public/buyers to require the seller to issue OR/SI, persons required by low to issue such receipts/invoices are hereby directed to post in their places of business, including branches and mobile stores, in such area conspicuous to the public, the below Notice to Issue Receipts/Invoices (NIRI):

These Regulations shall take effect after fifteen (15) days following publication in two (2) newspapers of general circulation.

Please refer https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202019/RR%20No.%2010-2019.pdf of the full text of RR No. 10-2019.

Application for Registration of Professional (Individual) - Licensed (PRC, IBP) / In General

As part of the ease of doing business, especially, in the Application of Registration of Business Profession - Licensed (PRC, IBP) and In General, the bureau has updated the requirements and BIR Form No. 1901 (Application for Registration).

If you want to register, I suggest to visit the bureau's office and inquire the Authorized Person of the Bureau of Internal Revenue (BIR) within your jurisdiction for the Application for Registration of Professional (Individual) - Licensed (PRC,IBP) / In General.

After gathering information, you may consider the general procedures for the  Application for Registration of Professional (Individual) - Licensed (PRC, IBP) / In General as follows:

Step 1. Fill-up BIR Form No. 1901 (Application for Registration) https://www.bir.gov.ph/images/bir_files/taxpayers_service_programs_and_monitoring_1/1901%20Jan%202018%20ENCS%20V4_03.04.2019.pdf

1. PhilSys Number (PSN) - Refer this link: https://www.bir.gov.ph/images/bir_files/research_and_statistics/NSCB_PSIC%202009.pdf of the PSIC 2009 contains the Philippine Standard Industrial Classification Code.

2. Registering Office - Mark with an "X" if Head Office or otherwise Branch Office. ((No. 4)

3. Fill out with your Taxpayer Identification Number (TIN) if with existing TIN. Otherwise request BIR for the issuance of TIN. (No. 4)

4. Mark with an "X" of the Taxpayer Type (No. 6) - Professional - Licensed (PRC, IBP) or Professional - In General

5. Fill out your Taxpayer's Name ((No. 7)

5. Mark with an "X" of your Gender (No. 8)

6. Mark with an "X" of your Civil Status (No. 9)

7. Fill out your Date of Birth ((No. 10)

8. Fill out your Place of Birth (No. 11)

9. Fill out your Mother's Maiden Name (No. 12)

10. Fill out your Father's Name (No. 13)

11. Fill out your Citizenship or Other Citizenship (No. 14 or No. 15)

12. Fill out your Local Residence Address (No. 16)

13.  Fill out your Business Address (No. 17)

14. Fill out your  Identification Details (e. q. passport, government issued ID, company ID, etc.) - No. 21

15. Fill out your Preferred Contact Type (No. 22)

16. Fill out your Employment Status of Spouse No. 24) and others (if applicable)

17. Fill out your Primary/Secondary Industries (No. 35)

18. Fill out your Registration / Accreditation Number (No. 37A) & Others (if applicable)

19. Determine your applicable Tax Types (No. 39). To be filled up by BIR)

20. Fill Authority to Print Receipts and Invoices (No. 40) and others. Secure Receipts for Services and determine if you will register as VAT or Non-VAT

21. Fill out the other required information (if applicable).

Step 2. Attached the Documentary Requirements:

1. Any Identification issued by an authorized government body (e. g. Birth Certificate, passport, driver's license, Community Tax Certificate) that shows the name, address and birthdate of the applicant.

2. Photocopy of Professional Tax Receipt/Occupational Tax Receipt issued by the LGU.

3. Proof of Payment of Registration Fee (RF) (if with existing TIN or applicable after TIN issuance).

4. BIR Form No. 1906 (Select an Accredited Printer)

5. Final & clear sample of Principal Receipts/ Invoices

Step 3. Fill out BIR Form No. 1905 (Application for Registration Information Update/Correction/Cancellation) for the Registration of Books of Accounts (No. 10) of Manual of Books of Account (New sets of permanently bound books of accounts).

1. Fill out your Taxpayer Identification Number (TIN); RDO Code & Contact Number - No.1, No. 2 & No. 3, respectively.

2. Mark with an "X" Update of Books of Accounts (proceed to Number 10) - No. 6 Other Updates

3. Fill out the Required Books of Accounts (No. 10). I suggest to register Cash Receipts Book, Cash Disbursements Book, Ledger Book & Journal Book or General Journal Book.

4. Fill out the Declaration (No. 12).

Don't forget to inquire other information such as your Certification of Registration (COR) and other necessary documents needed for the exercise of your business profession.

Guidelines in the Processing and Issuance of Certificate of Tax Exemption of Non-Stock, Non-Profit Corporations

Revenue Memorandum Order (RMO) No. 38-2019 was issued by the bureau to clarify the Tax Exemption of Non-Stock, Non-Profit Corporations under Section 30 of the National Internal Revenue Code of 1997, as Amended.

Guidelines in the Processing and Issuance of Certificate of Tax Exemption of Non-Stock, Non-Profit Corporations:

A. Documentary Requirements. 

1. Original application letter for issuance of Tax Exemption Ruling. The letter shall cite the particular paragraph of Section 30 of the NIRC, as amended, under which the application for exemption/revalidation is being based; 

2. Certified true copy of the latest Articles of Incorporation (AOI) and By-Laws issued by the Securities and Exchange Commission (SEC). The AOI must expressly state the following provisions, to wit: 

i. It is a non-stock, non-profit corporation or association; 

ii. No part of the corporation or association's net income shall inure to the benefit of any private individual; 

iii. The trustees of the non-profit corporation or association do not receive any compensation or remuneration; and 

iv. In case of dissolution, its assets shall be distributed to one or more entities formed for the purpose/purposes similar to its own, or to the Philippine government for public purpose. 

3. Original Certification under Oath by an executive officer of the corporation or association as to: 

(i) full description of its past, present, and proposed activities, 

(ii) the sources and disposition of income, 

(iii) detailed description of all revenues which it seeks to be exempted from income tax, and 

(iv) amount of income, compensation, salaries or any emoluments paid by the corporation or association to its trustees, officers and other executive officers. 

4. Original Certification issued by the RDO where the corporation or association is registered, indicating the TIN of the corporation, and certifying that said corporation is not subject of any pending investigation, on-going audit, pending tax assessment, administrative protest, claim for refund or issuance of tax credit certificate, collection proceedings, or a judicial appeal; or if there be any, the Original Certification issued by the RDO on the status thereof; and 

5. Certified true copies of the Income Tax Returns or Annual Information Returns and Financial Statements of the corporation or association for the last three (3) years. 

B. Procedure. 

a. The request for CTE shall be filed with the RDO where the corporation is registered. The RDO or his designated Revenue Officer of the Day must preevaluate the corporation's submission using the checklist (Annex "A"). If there is incomplete submission of the documentary requirements, the applicant shall be notified thereof and the entire documents shall be returned to the applicant for his completion. 

b. Upon receipt of the complete documentary requirements (docket) in support of the application, the concerned RDO personnel shall pre-evaluate the same and shall determine whether or not the applicant qualifies as an exempt corporation or association under Section 30 of the NIRC, as amended. 

i. If based on the pre-evaluation, the RDO is of the position that the corporation or association is qualified, he shall prepare the CTE (Annex “B”), together with a memorandum stating the factual and legal basis for recommending the issuance of the CTE, and endorse the docket to the Office of the Regional Director. If the Regional Director concurs with the RDO's recommendation, he shall sign the CTE and issue the same to the requesting corporation. Otherwise, he shall return the docket to the RDO together with his findings/instructions. 

ii. If the RDO is of the position that the corporation or association does not qualify, he shall notify in writing the applicant of such findings, stating the factual and legal bases for the denial. The applicant may appeal the denial to the Regional Director within thirty (30) days from the date of receipt of the written notice of denial. If the application for tax exemption/re-validation is denied, the corporation or association shall be held liable for income tax and shall be accordingly assessed for deficiency taxes, inclusive of penalties and interest.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202019/RMO_No.%2038-2019.pdf

Terminating the Submission of Semestral List of Regular Suppliers (SRS)

Due to the conflicts of the policy of ease of doing business, the submission of Semestral List Regular Suppliers (SRS) shall no longer be required or terminated as mentioned in Revenue Memorandum Circular (RMC) No. 122-2019.

The Circular was issued to make clarification of the Regulations issued. Under, Revenue Regulations (RR) No. 11-2018, the withholding agents liable to deduct the 1% and 2% CWT rates are now identified as top withholding agent (TWAs). The TWAs include the existing top 20,000 private corporations, top 5,000 individual taxpayers. TAMP, and medium taxpayers. As the submission SRS was no longer mentioned in the said regulations and this requirement cannot be applied to TAMP and medium taxpayers without an express provisions prescribing their compliance, this requirement is deemed to have been abandoned by operation of law.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20Full%20Text%202019/RMC%20No.%20122-2019.pdf of the full text of RMC No. 122-2019.

Requirements for Top Withholding Agents and Income Payments Subject to Creditable Withholding Tax

In relation with the Republic Act No. 10963, Otherwise Known as the "Tax Reform for Acceleration and Inclusion (TRAIN) Law", was further amended by the bureau through the issuance of Revenue Regulations (RR) No. 7-2019 of the pertinent provisions of Section 2 under RR No. 11-2018 Specifically on the Requirements for Top Withholding Agents.

"SECTION 2.57.2. Income Payments Subject to Creditable Withholding Tax and Rates Prescribed Thereon. Except as herein otherwise provided. xxx. -

xxx

(1) Income payment made by top withholding agents, either private corporations or individuals, to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. [formerly under letters (M) and (W) - Income payments made by any top withholding agents, including non-resident aliens engaged in trade or business in the Philippines, shall be subjected to the following withholding tax rates:

Supplier of goods - One percent (1%)

Supplier of services - Two percent (2%)

Top withholding agents shall refer to those taxpayers whose gross sales/receipts or gross purchases or claimed deductible itemized expenses, as the case may be amounted to TWELVE MILLION PESOS  (P12,000,000.00) during the preceding taxable year.

The top withholding agents by concerned LTS/RRs/RDOs shall be published in a newspaper of general circulation. It may also be posted in the BIR website. These shall serve as the "notice" to the top withholding agents. The obligations to withhold under this sub-section shall commence on the first (1st) day of the month following the month of publication. Taxpayers who are classified as top withholding agents prior to the effectivity of these Regulations shall remain as such until failure to satisfy the aforesaid criteria and duly published as delisted from the existing list of top withholding agents. The initial and succeeding publications shall included the additional top withholding agents and those that are delisted.

The term "goods" pertains to tangible personal property. It does not include intangible personal property, as well as agricultural products which are defined under item (N) of this Section.

The term "local resident suppliers of goods/suppliers of services" pertains to a supplier from whom any of the top withholding agents, regularly makes its purchases of goods/services. As a general rule, this term does not include a casual purchase of goods/services that is purchase made from a non-regular supplier and oftentimes involving a single purchase. However, a single purchase which involves Ten thousand pesos (P10,000) or more shall be subject to withholding tax under this subsection. The term "regular suppliers", for purposes of these regulations, refer to suppliers who are engaged in business or exercise of profession/calling with whom the taxpayer-buyer has transacted at least six (6) transactions, regardless of the amount per transaction, either in the previous year or current year."

Please refer https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202019/RR%20No%207-2019.pdf of the full text of RR No. 7-2019.

Tax Incentives for Establishments Granting Sales Discount and Prescribing the Guidelines for the Availment Thereof of PWD

Revenue Regulations (RR) No. 9-2019 refers to the amendments of Sections 2, 3 and 7 of RR No. 05-2017, Relative to Rules and Regulations Implementing Republic Act No. 10754, entitled "An Act Expanding the Benefits and Privileges of Persons with Disability and Tax Incentives for Establishments Granting Sales Discount, and Prescribing the Guidelines for the Availment Thereof. Amending RR No. 1-2009.

Section 3 of RR No. 5-2017 include a new paragraph to read as follows:

"SECTION 3. SALES DISCOUNTS WHICH MAY BE CLAIMED BY QUALIFIED PERSONS WITH DISABILITY (PWD)

XXX     XXX     XXX

All other goods and services sold by the foregoing establishments not included in the above enumeration expressly provided law shall not be considered for the 20% discount privilege notwithstanding that the same are for the exclusive use and enjoyment of the PWD. However,  every PWD shall enjoy a special discount of five percent (5%) of the regular retail price, without exemption from the value-added tax (VAT), of basic necessities and prime commodities enumerated under Sec. 2 (2.*) and (2.9) hereof. The total amount of said purchase shall not exceed the amount of One Thousand Three Hundred Pesos (Php1,300.00) per calendar week without carry-over of the unused amount. Provided, that said amount shall be spent on basic necessities an prime commodities commensurate to his personal exclusive consumption and or enjoyment within the calendar week. Provided, further that said amount shall be spent on at least four kinds of items listed as basic necessities  and prime commodities.

Section 7.1 of Section 7 of RR No. 5-2017, is hereby amended to be read as follows:

"SECTION 7. EXEMPTION FROM VALUE-ADDED  TAX (VAT) ON SALES OF GOODS OR SERVICES TO QUALIFIED PERSONS WITH DISABILITY.

7.1 Sale of any goods and services under Section 3 of these Regulations to PWD, except sale of basic
necessities and prime commodities enumerated under Sec. 2 (2.8) and (2.9) hereof, shall be exempt from the value-added tax.  xxx     xxx      xxx

Please https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Text%20RR%202019/RR%20No%209-2019.pdf of the full text of RR No. 9-2019.

Rate of Creditable Withholding Tax on Meralco Payments

Revenue Regulations (RR) No. 1-2019 was issued by the bureau to further amend certain provisions of RR 2-98 as amended by RR No. 11-2018, which implemented the Provisions of Republic Act 10963, Otherwise Known as Tax Reform for Acceleration and Inclusions (TRAIN) Law, Relative to some changes in the Rate of Creditable Withholding Tax on Certain Income Payments as follows:

SECTION l. AMENDMENT. Section 2 of RR 11-2018 on the amendments to Section 2.57.2 of RR 2-98, as amended, is hereby further amended to read as follows: 

"SECTION 2.57.2. Income Payments Subject to Creditable Payments Subject to Creditable Withholding Tax and Rate Prescribed Thereon. -  Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of of income payee from the following items of income payments to persons residing in the Philippines:

(A) XXX

 XXX                      XXX                        XXX 

(P) MERALCO Payments on the following: 

(1) MERALCO Refund arising from supreme court Case G.R. No. 141314 of April 9, 2003 to customers under phase IV as approved by Energy Regulatory Board (ERC)- on gross amount of refund given by MERALCO to customers - Fifteen percent (15%) 

(2) interest income on the refund of meter deposits determined, computed and paid in accordance with the "Rules to Govern Refund of Meter Deposits to Residential and Non-Residential Customers", as approved by the ERC under Resolution No, 8, Series of 2008, dated June 04, 2008 implementing Article 8 of the Magna Carta for Residential Electricity Customers and ERC resolution No, 2005-10 RM (Otherwise known as DSOAR) dated January 18, 2006, exempting all electricity consumers from the payment of meter deposit. 

On gross amount of interest paid directly to the customers or applied against the customer's billings:

(i) Residential and General Service customers whose monthly electricity exceeds 200 kwh as classified by MERALCO - Ten percent (10%) 

(ii) Non-Residential Customers - Fifteen percent (15%) 

(Q) Interest income on the refund paid through direct payment or application against customer's billings by other electric Distribution Utilities (DUs) in accordance with the rules embodied in ERC Resolution No. 8, Series of 2008, dated June 04, 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 Customers and Article 3.4.2 of DSOAR, exempting all electricity consumers, whether residential or nonresidential, from the payment of meter deposit. On gross amount of interest paid directly to the customers or applied against the customer's billings: 

{i) Residential and General Service customers whose monthly electricity consumption exceeds 200 kwh as classified by the concerned DU -Ten percent (10%) 

(ii) Non-Residential Customers - Fifteen percent (15%)

(R)     XXX          XXX         XXX 

(S) Interest income derived from any other debt instruments not within the coverage of 'deposit substitutes'and Revenue Regulations No. 14-2012, unless otherwise provided by law or regulations - Fifteen percent (15%) 

All existing rules and regulations or parts thereof which are inconsistent with the provisions of these regulations are hereby revoked and are effective beginning January 01, 2019.

Please refer: https://www.bir.gov.ph/images/bir_files/internal_communications_1/RR%20No%201-2019.pdf of the full text of RR No. 1 - 2019.

eBIRForms Package v7.4.2 is Now Available for Download

The bureau just recently announced the new updates of Offline eBIRForms Package from eBIRForms Package v7.4.1 to eBIRForms Package v7.4.2

To download the Offline eBIRForms Package v7.4.2, please click below:

http://ftp.pregi.net/bir/ebirforms_package_v7.4.2.zip