Payment of Deficiency Withholding Taxes for the Present and/or Subsequent Years

April 1, 1959 BIR RULING NO. 164-59 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589, Manila Gentlemen : Reference is made to your letter dated February 7, 1959, requesting confirmation of the correctness of the advice you gave your clients which, together with the facts upon which it was given, is quoted below: cdta "We have a number of clients that have been withholding income taxes at the rate of 24% on fixed and determinable income payments, e.g. royalties, made by them to non-resident foreign corporations. At the end of each year, the withholding agent files the corresponding withholding tax return; frequently, the non-resident foreign corporation also files an income tax return reporting the same items as income. "In cases such as the above, your Office would issue an assessment notice only for the tax liability based on the income tax return. Sometimes, your Office would also issue an assessment notice for the withholding tax, but would cancel this assessment when proof of the filing of the income tax return and the issuance of the income tax assessment is submitted to you. As a result of this, whenever the net income of the non-resident foreign corporation is below P200,000, and in view of the difference between the withholding tax rates and the income tax rates, there remained in the possession of the withholding agent amounts representing excess withheld taxes. Some of our clients expect that, for 1958 and subsequent years, and because the anticipated income payments will exceed P200,000, the withheld taxes, computed at 24%, will be less than the income tax liability, computed at the graduated rates, appearing on the non-resident's income tax return. "Our clients have requested our advice as to whether it would be in accordance with Philippine internal revenue laws for them to apply the above-mentioned excess withheld taxes of prior years in payment of the expected deficiency withholding taxes for 1958 and subsequent years on income payments made by them to the same non-resident foreign corporations for whose account they still retain the said excess withheld taxes. We have advised them that it would be all right for them to do so and would appreciate your confirming that this is correct." In answer thereto, I have the honor to inform you that excess withheld taxes for prior years remaining in the possession of the withholding agent can be applied in payment of deficiency withholding taxes for the present and/or subsequent years or, for that matter, any tax due or to be due, without prejudice, however, to the liability of the withholding agent under Section 54, in relation to Section 53 of the Tax Code. cdti Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue