Tax Exemption Certificate Presentation Rules

Section 32(A) in relation to Section 27(A) of the Tax Code defines gross income broadly to include all income from any source unless otherwise specified.
Items included as gross income are:
1. Compensation such as fees, salaries, commissions.
2. Income from trade or business or professional activities.
3. Gains from property dealings.
4. Interests, rents, royalties, dividends, annuities.
5. Prizes, winnings, and pensions.
6. Partner's share from professional partnership net income.

Sections 57 to 59 and 78 to 83 of the Tax Code, as well as Revenue Regulations No. 02-1998 and its amendments, provide for withholding taxes on certain income types.
Withholding taxes include final tax, creditable/expanded withholding tax, and withholding tax on compensation with prescribed rates.

Some individuals, entities, and transactions are exempt from income tax and withholding tax as provided by law and administrative issuances.
Withholding agents must require presenting a valid, current, and subsisting tax exemption certificate or ruling before making related income payments.
The certificate or ruling must explicitly acknowledge tax and withholding tax exemption.

Failure of the taxpayer to present the required certificate or ruling mandates payment of the correct withholding tax by the taxpayer.
Failure of the withholding agent to withhold tax despite the absence of such certificate or ruling results in penalties under Section 251 and other relevant provisions of the Tax Code.

This Circular revokes all inconsistent prior issuances.
Revenue officials and employees are instructed to widely disseminate this Circular.
The Circular is effective immediately upon issuance.