Question & AnswerQ&A (BIR REVENUE REGULATION NO. 12-94)
A creditable income tax shall be withheld at prescribed rates for each class of payee from specified items of income payments to persons residing in the Philippines as outlined in Section 1 of the regulation.
The rates are 1.5% for selling prices up to P500,000, 3% for selling prices over P500,000 but not over P2,000,000, and 5% for selling prices over P2,000,000.
Withholding agents include individuals making payments in connection with their trade or business, juridical persons whether or not engaged in trade or business, and all government offices including government-owned or controlled corporations.
Yes, individual buyers not engaged in trade or business are constituted as withholding agents for taxable sale, exchange or transfer of real property under Section 1(j), though they need not register as such.
Exemptions include income payments to the national government and its instrumentalities, transactions covered by specific laws such as socialized housing projects under RA 7279 with certain price limits, persons exempt under the Omnibus Investment Code, exempt corporations as per Section 26 NIRC, and payees with net operating losses in the previous two years, among others.
The payee must furnish a Certificate of Exemption from withholding tax issued by the Commissioner of Internal Revenue.
Every payor must furnish the payee with a withholding tax statement using the prescribed BIR form within 30 days after the end of the taxable quarter the payee uses, or upon request simultaneously with the income payment.
Claims are allowed only if the income payment received has been declared in the gross income and supported by a Withholding Tax Statement issued by the payor. Excess credits may be automatically applied or refunded upon request and audit, with certain procedural requirements.
The seller is automatically considered habitually engaged in the real estate business for withholding tax purposes.
It took effect fifteen days after publication in the Official Gazette or any newspaper of general circulation, whichever came first.