菲律宾的代扣代缴税说明Expanded-Withholding-Taxes-in-the-Philippines-(3).doc

Expanded Withholding Taxes in the Philippines
November 3, 2014
Expanded Withholding Tax (EWT) or Creditable Withholding Tax (CWT) in the Philippines is a tax type that each taxpayer should be aware of as it is being made a mandatory for income tax deductibility of certain expenses in the Philippines. Failure to comply with the requirements of this withholding tax in the Philippines could prove to be inconvenient, if not costly. To facilitate learning of the basic concepts of expanded withholding tax in the Philippines, the below pointers are being enumerated.

1. A system of advance collection of income taxes
Income tax in the Philippines is normally taken up at the end of taxable year of taxpayers where the annual income tax return in the Philippines is being filed. Under the expanded withholding tax system, the payor or withholding agent is mandated to withhold and remit withheld taxes not later than the 10th day (or 15th day for month of December) of the month following the month of payment or accrual thereof.  This would mean that the tax authority would collect the income tax of the payee on such income even before the payee files its income tax return in the Philippines.
2. A check and balance mechanism 
Mind you, the withholding tax system had been an effective way to check on whether the payee reported its income or whether the payor reported the corresponding expense or income payment. This is made through the matching of withholding tax reports and returns filed by the payee – the BIR Form No. 1601-E and online monthly alphalist of payees (MAP), and that of the payor – the value added tax return (VAT) and income tax return (ITR) with summary alphalist of withholding taxes (SAWT). This would mean that taxpayers should e extra careful in dealing with items subjected to withholding taxes.
3. Not all payor’s are required to withhold
While income payments enumerated under Revenue Regulations No. 2-1998, as amended are normally subject to expanded withholding tax, please bear in mind that not all payor’s are required to withhold. As a general rule, only payor’s who are engaged in trade or business or those engaged in the practice of  profession are automatically constituted as withholding agent for the expanded withholding tax in the Philippines.
4. Income tax-exempt taxpayers and income are withheld
As stated above, expanded withholding tax is an advance collection of payee’s income tax.  This would mean that if the income payment or if the payee entity is exempted from income tax in the Philippines, then, the same is not subject to expanded withholding tax tax in the Philippines. Examples of this is payments to a general professional partnerships (GPP), payments to government entities, payments to foundations, PEZA-registered entities, BOI-registered entities under income tax holiday (ITH). For those income payments exempted from withholding tax, the payor-taxpayer is required to secure proof of such exemption such as a certificate of tax exemption (CTE) or tax exemption rulings, if applicable, and without such proof of exemption, penalties could be applicable.
5. Only specific income payments are subject to expanded withholding taxes
The common misconception is that all expenses are subject to expanded withholding tax. This is not what it seems. For a payor taxpayer who is not a top-twenty thousand corporation (TTC), top-five thousand individual (TFI), or a government entity payor, only those enumerated under Revenue Regulations No. 2-98, as amended, are subject to expanded withholding tax such as but not limited to the following:
· Professional fees of 10% or 15%;
· Rentals for real and personal properties of 5%;
· Contractors and sub-contractors of certain services of 2%;
· Commissions of 10%;
· Payments of credit card companies of .5%;
· Payments by funeral companies to embalmers of 1%;
· Payments by pre-need companies to funeral parlors of 1%;
· Tolling fees paid to refineries of 5%;
Income payments not specifically enumerated in Revenue Regulations No. 2-98, as amended, are not subject to expanded withholding tax in the Philippines.
6. Mandatory withholding tax of top-twenty thousand corporations (TTC) 
As a matter of exception to the rule, top-twenty thousand corporation (TTC) and top-five thousand individuals (TFI) are mandated to withhold the following rates on income payments to regular suppliers and casual purchases other than those income payments enumerated under Revenue Regulations No. 2-98, as amended:
· Purchase of services of 2%;
· Purchase of goods of 1%.
Regular suppliers would mean that the payor had at least six (6) transactions with the payee, and casual purchase would mean a transaction from a non-regular supplier of at least P10,000.00. The above mandatory rates are likewise applicable to government entity payors regarless of whether or not they are regular suppliers or casual purchase.
7. Withholding tax certificates (Form No. 2307) sufficient proof of withholding
To support a claim for tax credit, payor-issued withholding tax certificate or BIR Form No. 2307 in the Philippines is a sufficient proof of the payee that the withheld taxes are remitted to the BIR or tax authority. Payee is not mandated to establish proof that the payor has indeed, remitted to the BIR the amount withheld as taxes, and the confirmation of the payor by the signature on the portion of the BIR Form No. 2307 is sufficient to claim tax credit for income tax returns filing.
8. Income and related Form 2307 must be claimed in the same taxable year
The simple rule is to claim the tax credits supported by BIR Form No. 2307 in the same year the income has been recorded. Out-of-period claims of BIR Form No. 2307 in subsequent years shall be disallowed and penalty will be imposed. To avoid such scenario, payees are encouraged to monitor their withholding tax certificates and ensure that they are properly claimed in the taxable quarter where income is earned or realized or at least within the taxable year. The common remedy for BIR Form No. 2307 furnished late by payors is to amend the income tax return for the applicable year, in case no tax examination yet, and carry-over the excess tax credits to subsequent taxable quarter or year.
References:
· Revenue Regulations No. 2-1998, as amended,
· Revenue Memorandum Circular No. 8-2014