Purpose and coverage of withholding tax
- BIR Revenue Regulations No. 6-2009 provides additional criteria in determining Top 20,000 Private Corporations and expands the income payments subject to creditable withholding tax for top taxpayers (Section 1).
- Section 2 amends Section 2.57.2 of RR No. 2-98 by adding rules on additional income payments subject to creditable withholding tax for top private corporations and the agricultural products threshold.
- Section 2 further adds and defines similar rules for Top 5,000 Individual Taxpayers involving income payments and the agricultural products threshold.
- The withholding applies to income payments made by the covered “top” taxpayers to covered suppliers of goods and services, subject to rates and thresholds stated in the regulation (Section 2).
Definitions: key terms used
- Supplier of goods is subject to a 1% withholding rate for covered transactions (Section 2 under the top corporations and top individuals rules).
- Supplier of services is subject to a 2% withholding rate for covered transactions (Section 2 under the top corporations and top individuals rules).
- Agricultural products in their original state include corn, coconut, copra, palay, rice, cassava, sugar cane, coffee, fruits, vegetables, marine food products, poultry and livestocks (Section 2).
- “Goods” refers to tangible personal property used in the ordinary course of business and/or practice of profession, and it excludes intangible personal property and real property (definitions provided under the top 5,000 individual rules).
- “Local/resident supplier of goods” refers to a supplier from whom any of the top 5,000 individual taxpayers regularly makes purchases of goods (with specific rules on regular vs casual purchases, and a special threshold rule for non-agricultural goods) (definitions under the top 5,000 individual rules).
- “Regular suppliers” are suppliers engaged in business or practice of profession/calling with whom the taxpayer-buyer transacted at least six (6) transactions, regardless of amount, in the previous year or current year (definitions under the top 5,000 individual rules).
- Top 20,000 Private Corporations are corporate taxpayers determined and notified by the Bureau of Internal Revenue (BIR) as meeting any enumerated criteria, including automatic inclusion based on prior classification (Section 2).
- Top 5,000 Individual Taxpayers are individual taxpayers engaged in trade or business or exercise of profession determined and notified by the BIR as meeting any enumerated criteria (Section 2).
Who is covered: top taxpayers and suppliers
- Top 20,000 private corporations include corporate taxpayers determined and notified by the Commissioner as satisfying any of these criteria: large taxpayer classification or prior inclusion in specified RR lists, unless previously de-classified or already ceased operations (Section 2, criteria (a)).
- Under the Top 20,000 rule, withholding applies to income payments made by any of the top 20,000 private corporations to their local/resident suppliers of goods and local/resident suppliers of services, including non-resident aliens engaged in trade or business in the Philippines (Section 2).
- For Top 5,000 Individual Taxpayers, withholding applies to income payments made by them to their local/resident suppliers of goods and local/resident suppliers of services, including non-resident aliens engaged in trade or business in the Philippines (Section 2, “(W)” provision).
- Local/resident supplier of goods generally excludes casual purchases from non-regular suppliers, but a single purchase of goods other than agricultural products involving P10,000.00 or more is subject to withholding (definitions under the top 5,000 individual rules).
- An individual is not treated as a withholding agent for these regulations unless determined and duly notified in writing by the Commissioner as selected among the Top 5,000 Individual Taxpayers, and remains so unless later notified in writing (Section 2, withholding agent rule for individuals).
- A taxpayer ceases to be a withholding agent when the individual submits to the BIR a notice of closure or cessation of all lines of business, or fails to meet the enumerated criteria and receives a written notice of deletion from the Commissioner of Internal Revenue (Section 2).
Income payments subject to creditable withholding
- Creditable income tax withholding applies “except as otherwise provided” to income payments to persons residing in the Philippines, covering specified payment items (amendment to Section 2.57.2 of RR No. 2-98, Section 2).
- For Top 20,000 private corporations, withholding applies to income payments to local/resident suppliers of goods and local/resident suppliers of services other than those covered by other withholding tax rates (Section 2, insertion under (M)).
- For purchases involving agricultural products in their original state, the tax required to be withheld applies only to purchases in excess of the cumulative amount of PHP 300,000 within the same taxable year (Section 2, proviso under (M)).
- Agricultural products in their original state are limited to the specific list of products enumerated in the regulation (Section 2, same proviso).
- For Top 20,000 private corporations, the withholding rates are:
- 1% for supplier of goods, and
- 2% for supplier of services (Section 2, under (M)).
- For Top 5,000 individual taxpayers, withholding similarly applies to income payments to local/resident suppliers of goods and services other than those covered by other withholding tax rates, including agricultural products subject to the same PHP 300,000 cumulative threshold within the same year (Section 2, (W) proviso).
- For Top 5,000 individual taxpayers, the withholding rates are the same:
- 1% for supplier of goods, and
- 2% for supplier of services (Section 2, under (W)).
Rates, threshold mechanics, and criteria
- Withholding rate rule for agricultural products: when agricultural purchases reach and exceed the PHP 300,000 cumulative threshold in the same year, withholding applies to the excess amount only (Section 2, agricultural products proviso).
- Top 20,000 private corporations must satisfy at least one of these criteria:
- (a) Classified and duly notified as a large taxpayer under Revenue Regulations No. 1-98, as amended, or included among the top 5,000 private corporations under RR 12-94, or among the top 10,000 private corporations under RR 17-2003, unless previously de-classified or the corporation has ceased business operations (automatic inclusion) (Section 2, criteria (a)).
- (b) VAT payment or payable, whichever is higher, of at least PHP 100,000 for the preceding year (Section 2, criteria (b)).
- (c) Annual income tax due of at least PHP 200,000 for the preceding year (Section 2, criteria (c)).
- (d) Total percentage tax paid of at least PHP 100,000 for the preceding year (Section 2, criteria (d)).
- (e) Gross sales of PHP 10,000,000 and above for the preceding year (Section 2, criteria (e)).
- (f) Gross purchases of PHP 5,000,000 and above for the preceding year (Section 2, criteria (f)).
- (g) Total excise tax payment of at least PHP 100,000 for the preceding year (Section 2, criteria (g)).
- Top 5,000 individual taxpayers must satisfy at least one of these criteria:
- (a) VAT payment or payable, whichever is higher, of at least PHP 100,000 for the preceding year (Section 2, criteria (a)).
- (b) Annual income tax due of at least PHP 200,000 for the preceding year (Section 2, criteria (b)).
- (c) Total percentage tax paid of at least PHP 100,000 for the preceding year (Section 2, criteria (c)).
- (d) Gross sales of PHP 10,000,000 and above for the preceding year (Section 2, criteria (d)).
- (e) Gross purchases of PHP 5,000,000 and above for the preceding year (Section 2, criteria (e)).
- (f) Total excise tax payment of at least PHP 100,000 for the preceding year (Section 2, criteria (f)).
- For resident citizens with multiple lines of business, the regulation requires tax payments, gross sales, and gross purchases to be determined by taking into account all lines of business, consistent with the requirement to declare income from all sources (Section 2, computation rule for resident citizens).
- For other individuals (including resident alien, non-resident alien, and non-resident citizen) engaged in trade or business in the Philippines, the regulation limits included gross sales and gross purchases to those derived in the Philippines for purposes of determining qualification (Section 2, computation rule for other individuals).
Implementation: reporting, EFPS filing, lists
- Top 5,000 individual taxpayers engaged in trade or business or practice of profession must file returns and remit the taxes withheld through the Electronic Filing and Payment System (EFPS) pursuant to Revenue Regulations No. 9-2001, as amended by RR Nos. 2-2002, 9-2002, 26-2002 and 5-2004 (Section 3).
- Top 5,000 individual taxpayers must submit a list of regular suppliers of goods and/or services to the Revenue District Officer having jurisdiction over their principal place of business on or before July 31 and January 31 for the first and second semester of each year, respectively (Section 2, list-submission rule).
- The supplier list must be submitted in diskette/CD format or through e-submission (Section 2, list-submission rule).
- The technical specifications for the supplier list are prescribed in a separate revenue issuance (Section 2, technical specifications reference).
- The initial list must be submitted within 15 days from receipt of the notice of being included among the Top 5,000 Individual Taxpayers (Section 2, initial list rule).
- The Commissioner may recommend to the Secretary of Finance amendment or modification of criteria for determining and selecting the Top 5,000 individual taxpayers, and the Commissioner must conduct periodic review for delisting/excluding taxpayers and identifying taxpayers to be included (Section 2, Commissioner’s review and recommendations).
Repeal and effect
- All existing revenue regulations and other issuances, or portions of them, inconsistent with BIR Revenue Regulations No. 6-2009 are revoked, repealed, or amended accordingly (Section 4).
- The regulation becomes effective after 15 days following publication in a newspaper of general circulation (Section 5).