Withholding Tax Rates
- 1% withholding tax for brand new motor vehicles sold by participants in the CDP or CVDP.
- 2% withholding tax applies to:
- Motor vehicles not qualifying as brand new under the programs.
- Repossessed second hand vehicles sold by franchised dealers.
Tax Base Determination
- Withholding tax is computed on the gross selling price or total consideration, without deducting discounts or price adjustments.
- Value Added Tax (VAT) passed to the buyer is excluded from the tax base.
- The tax base is the higher of the amount stated in the sales documents or the Official Schedule of Values of Motor Vehicles.
- For exchanges, the fair market value of the vehicles at the time of exchange is used.
Timing and Remittance of Withholding Tax
- The buyer as withholding agent must deduct and withhold the tax at the time the income payment is paid or payable.
- The withheld tax must be remitted to the Bureau of Internal Revenue (BIR) within ten days after the end of the month in which the payment was made.
Documentary Requirements and Tax Crediting
- Payment of withholding tax must be evidenced by Confirmation/Official Receipts.
- Withholding tax payments are creditable against the income tax liabilities of the seller.
- The buyer must issue a Certificate of Income Tax Withheld At Source (BIR Form No. 1743.1) to the seller.
Filing Venue for Withholding Tax Return
- Generally, the withholding tax return must be filed at the Revenue District Office where the buyer-withholding agent's principal place of business is located.
- Exception: The return may be filed and tax paid at the Revenue District Office where the motor vehicle is or will be registered.
Certificate Authorizing Registration (CAR)
- The Land Transportation Office (LTO) shall not register a vehicle sale, transfer, or exchange without a CAR.
- The CAR must indicate payment details of the creditable withholding tax or certification of exemption.
- CAR is issued by the appropriate Revenue District Officer.
Reporting Requirements
- Officials issuing CARs must include in their monthly reports to the BIR's Chief of Withholding Tax Division all withholding payments related to vehicle sale or transfer.
- Reports are due by the 7th day of the following month.
Effectivity and Transitional Provisions
- The guidelines became effective on June 1, 1991.
- Documents notarized before June 1, 1991 but presented after are exempt from the Circular's coverage, following anti-ante dating rules.
Illustrations and Specific Transactions
- Tax applies only to vehicle transactions occurring after June 1, 1991.
- Assembly of vehicle parts by third parties without sale of materials does not trigger withholding tax.
- Donations of motor vehicles are exempt from withholding tax but subject to donor's tax.
- Exchange transactions involve two taxable events on fair market values.
- Government agency sales (e.g., Bureau of Customs auction) are exempt; foreclosure sales are subject to withholding tax.