Effect of the Implementation of E.O. No. 273 Otherwise Known as the Value-Added Tax Law on the Requirements of Withholding and Remitting of Taxes by Government Offices and Agencies Pursuant to R.A. No. 1051

March 24, 1988 REVENUE MEMORANDUM CIRCULAR NO. 18-88 SUBJECT : Effect of the Implementation of E.O. No. 273 Otherwise Known as the Value-Added Tax Law on the Requirements of Withholding and Remitting of Taxes by Government Offices and Agencies Pursuant to R.A. No. 1051 TO : All Internal Revenue Officers and Others Concerned 1. Revised Revenue Regulations No. 20-86 amending Revenue Regulations No. 4-83 and implementing Republic Act No. 1051 govern the manner of withholding and remitting of business, franchise and premium taxes to the Bureau of Internal Revenue due on account of money payments to be made by government offices, instrumentalities and agencies. The value-added tax imposed under E.O. No. 273 has replaced the sales tax, contractor's tax, miller's tax and broker's tax effective January 1, 1988. However, the value-added tax, the amount of which cannot be fixed, determined, computed or ascertained at the time of such payments by the government offices, instrumentalities and agencies is not subject to the withholding and remittance provisions of R.A. No. 1051 and its implementing regulations. On the other hand, payments subject to the caterer's, room occupancy, common carrier's, franchise and premium taxes remain subject to the said withholding and remittance provisions. cd 2. Payments/billings for services completely rendered but which remain unpaid as of December 31, 1987 are still subject to the 4% contractor's tax provided that the conditions prescribed under Section 6 (g) of Revenue Regulations No. 5-87, implementing Executive Order No. 273 are complied with, in which case, the withholding and remittance provisions provided in Revenue Regulations No. 20-86 shall still apply. 3. Sales, contractor's, miller's and broker's taxes erroneously withheld during the months of January, February and March 1988, shall nevertheless be remitted to the Bureau of Internal Revenue, and may be claimed as refund or tax credit by the taxpayer concerned. 4. Money payments to persons who are exempt from the value-added tax because their gross quarterly sales or receipts did not exceed P200,000 during a 12-month period and who are, therefore, subject to a tax equivalent to 2% of their gross quarterly sales or receipts under Section 112 of the Tax Code, as amended by Executive Order No. 273, shall be covered by the withholding and remittance provisions pursuant to Revenue Regulations No. 20-86 implementing Republic Act No. 1051. cd It is desired that this Circular be given as wide a publicity as possible. (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge