QuestionsQuestions (BIR REVENUE REGULATION NO. 4-88)
All bureaus, offices, and instrumentalities of the government, including government-owned or controlled corporations and their subsidiaries, as well as provinces, cities, and municipalities, are required to deduct and withhold taxes before making money payments to private individuals, corporations, partnerships, and associations.
Percentage taxes on gross money payments to proprietors or operators of restaurants, refreshment parlors, eating places, hotels, motels, transportation operators, franchise grantees, insurance business operators, and certain sellers of goods or services whose annual sales do not exceed P200,000 are subject to withholding tax.
Twelve percent (12%) on gross receipts in the case of restaurants within cockpits, cabarets, and night or day clubs, and twenty-five percent (25%) for those within Jai-Alai and race tracks.
Government agencies or instrumentalities receiving payments in the exercise of their governmental functions and private individuals or entities exempt from the relevant taxes, provided they present a certificate of exemption issued by the Commissioner of Internal Revenue or authorized representatives.
The tax is computed based on gross money payments separately invoiced for food or refreshments and for distilled spirits, fermented liquors, or wines. If sales are not separately invoiced, the entire payment is subject to the higher 8% tax rate.
Withholding government offices must file a Monthly Return of Internal Revenue Taxes Withheld on Government Money Payment (BIR Form 7.50A) and pay the tax within ten days following the end of the calendar month during which withholding was made. Payments are made to the Revenue District Officer or authorized collection agent.
It serves as evidence of tax withheld by the government entity and is furnished to payees to serve as a credit against their sales tax, percentage tax, or franchise tax liability.
Officers or employees responsible may be fined between P5,000 and P50,000, or imprisoned from six months and one day up to two years, or both, and may also face dismissal from government service.
Sellers exempt from VAT are not required to have withholding tax deducted if they have elected to register and be subjected to VAT. However, sellers with aggregate annual sales not exceeding P200,000 who are not VAT-registered are subject to a 2% withholding tax on gross sales.
These regulations took effect immediately upon their adoption on January 21, 1988.