Creditable Withholding Tax on Top 5,000 Corporations

Section 1(n) of Revenue Regulations No. 6085, as amended by Revenue Regulations No. 12-94, governs creditable withholding tax on income payments made by top 5,000 corporations.
The withholding tax rule applies to income payments made by a corporation after it is determined and duly notified in writing by the Commissioner of Internal Revenue that it has been selected as one of the top 5,000 corporations.
The withholding and related duties operate as a tax administration mechanism under the withholding system described in the governing Revenue Regulations.
The circular specifically implements the withholding mechanics, definitions, and procedural requirements embedded in Section 1(n).

The circular is issued to provide information and guidance to internal revenue officials and concerned parties regarding creditable withholding tax obligations.
The circular mandates publicity to ensure broad awareness and proper compliance with withholding duties under Section 1(n).

For this regime, the term “goods” pertains to tangible personal property and does not include intangible personal property or real property.
For this regime, “local suppliers of goods” refers to a supplier from whom any of the top 5,000 corporations, as determined by the Commissioner, regularly makes purchases of goods.
As a general rule, a casual purchase is excluded from the “local suppliers of goods” concept when it is not from regular suppliers and involves single purchases.
The governing rule treats a casual purchase as within the regime when the amount of purchase at any one time is P100,000 or more, making that purchase subject to the withholding tax.

A corporation is not a withholding agent under Section 1(n) unless it has been determined and duly notified in writing by the Commissioner that it has been selected as one of the top 5,000 corporations.
A corporation classified and notified as a large taxpayer by the Large Taxpayers Division of the BIR is considered one of the top 5,000 corporations.
The authority of a large taxpayer corporation to act as a withholding agent is effective only upon receipt of written notice from the Commissioner confirming classification as one of the top 5,000 corporations.

Section 1(n) imposes withholding on income payments made by any of the top five thousand (5,000) corporations to their local suppliers of goods.
The withholding rate for these covered income payments is one percent (1%).
The withholding applies to income payments made by the top 5,000 corporations to their local suppliers of goods as defined for tangible personal property.

The withholding mechanism applies when purchases are made from a supplier who is a regular supplier of goods to the top 5,000 corporation.
A purchase from a non-regular supplier (casual purchase) remains outside the general supplier concept unless the purchase amount at any one time is P100,000 or more.
When the threshold P100,000 or more is met for a single time purchase, the transaction is treated as subject to the withholding tax.

The withholding agent must remit the taxes withheld.
The withholding agent must file the required withholding tax return within the tenth (10th) day of the following month.
Remittance and filing must be made through duly accredited agent banks in places covered by the New Payment Control System (NPCS) or through the Collection Agent or duly authorized treasurer of the municipality where the withholding agent’s legal residence or principal place of business is located.

The withholding agent must issue a withholding tax statement to the payee (whether individual or corporate).
The withholding tax statement must be issued using the prescribed BIR form and must show the income payments and the amount of taxes withheld.
The withholding tax statement must generally be issued within fifteen (15) days following the close of the taxable quarter employed by the payee in filing the payee’s quarterly income tax return.
The withholding taxes withheld shown in the statement may be used by the payee as a credit against any income tax liability to the Government.

The withholding agent must submit, on a semestral basis, a list of its regular suppliers of goods.
The list must be submitted to the Revenue District Office having jurisdiction over the withholding agent’s principal place of business.
The deadline for submission of the list must be not later than June 30 and December 31 of each year hereafter.

All internal revenue officials and others concerned must give the circular the widest publicity possible to ensure compliance and awareness.