Revised regulations implementing Republic Act No. 1051

March 15, 1983 REVENUE REGULATIONS NO. 04-83 SUBJECT : R evised regulations implementing Republic Act No. 1051 TO : All Internal Revenue Officers, Withholding Agents and Others Concerned Pursuant to Section 3 of Republic Act 1051, these revised regulations are hereby promulgated to govern the manner of withholding and remitting of taxes due on account of money payments to be made by government offices and agencies. Offices required to deduct and withhold . All bureaus, offices and instrumentalities of the government, including government-owned or controlled corporations, provinces, cities and municipalities, shall, before making any money payment to private individuals, corporations, partnership and/or associations, deduct and withhold the taxes due from the said payees on account of such money payments. Internal revenue taxes required to be withheld . The following taxes, the amounts of which can be fixed, determined, computed or ascertained are subject to withholding: A. Business tax 1. Sales tax on gross payments to producers for every original domestic sale, barter, exchange or transfer of : (a) Mineral, mineral products, sand and gravel and quarry resources, except gold and other precious metals, ten per centum (10%) of the gross selling price thereof as provided for in Section 199(a) of the Tax Code. (b) Logs, lumber and all forest products, ten per centum (10%) of the gross selling price thereof as provided for in Section 199(a) of the Tax Code. (c) Cement, five per centum (5%) of the gross selling price thereof as provided for in Section 201 of the Tax Code. (d) Agricultural food products including ordinary salt and all kinds of fish or its by-products, whether in their original state or not (except those subject to tax under Section 201 and 203 of the Tax Code), and agricultural non-food products, whether in their original state or not (except those subject to tax under Section 203 of the tax Code), one per centum (1%) of the gross selling price or gross value in money as provided for in Section 198 of the Tax Code. 2. Percentage tax on gross money payments to (a) proprietors or operators of rope factories, sugar central and mills, coconut oil mills, cassava mills, and desiccated coconut factories, two per centum (2%) of the actual selling price or market value of the articles produce, processed, or manufactured as provided for in Section 203 of the Tax Code. (b) contractors, proprietors, or operators of dockyards and others at three per centum (3%) as provided for in Section 205 of the Tax Code. 1. General engineering, general building and specialty contractors as defined in Republic Act Numbered Four Thousand Five Hundred Sixty-Six; cdt 2. Filing demolition and salvage work contractors; and proprietors of mine drilling apparatus; 3. Proprietors or operators of dockyards; 4. Persons engaged in the installation of water system, and gas or electric light, heat or power; 5. Proprietors or operators of smelting plants, engraving plants, plating establishments, and plastic lamination establishments; 6. Proprietors or operators of establishments for upholstering, washing or greasing of motor vehicles, vulcanizing, recapping and battery charging. 7. Proprietors or operators of establishments for planning or surfacing and recutting of lumber, and sawmills under contract to saw or cut logs belonging to others ; 8. Proprietors or operators of dry-cleaning or dyeing establishments, steam laundries, and laundries using washing machines; 9. Proprietors or owners of shops for the repair of any kind of bicycles or vehicles, mechanical and electrical devices, instruments, apparatus, or furniture and shoe repairing by machines or any mechanical contrivance; 10. Proprietors or operators of tailorshops, dresshops, milliners and hatters, beauty parlors, barbershops, massage clinics, sauna, turkish and swedish bath, slenderizing and building saloons and similar establishments, photographic studios, and funeral parlors; 11. Proprietors or operators of establishments or lots for parking purposes; 12. Proprietors or operators of arrastre and stevedoring, warehousing, or forwarding establishments; 13. Registered master plumber, smith, and house or sign painters; 14. Printer, bookbinders, lithographers and publishers except those engaged in the publication or printing and publication of any newspaper, magazine, review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not devoted principally to the publication of advertisements; 15. Business agents and other independent contractors including private detective or watchman agencies except gross receipts of a pioneer enterprise registered with the B oard of Investments under Republic Act No. 5186. (A s amended by PD No. 1457) dated June 11, 1978); and 16. Lessors of personal property except non-resident owners of property subject to the final tax under Section 24(b) (vii) of this Code. (As amended by Ibid .) The term "independent contractors" includes persons (juridical or natural) not enumerated above (but not including individuals subject to the occupation tax u nder Section 12 of the Local Tax Cod e) whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of that services calls for the exercise or use of the physical or mental faculties of such contractors or their employees. (c) proprietors or operators of restaurants, refreshments, parlors including clubs and caterers, three or seven per centum (3 or 7%) as provided for in Section 206 of the Tax Code . casia (d) proprietors, operators or keepers of hotels, motels, rest houses, pension houses, lodging houses and resorts, ten per centum (10%) as provided for in Section 205-A of the Tax Code. (e) Stock, real estate, commercial and customs brokers, six per centum (6%) as provided for in Section 205-A of the Tax Code. (f) common carriers, by land, air, or water except owners of bancas and owners of animal drawn through field vehicles, two per centum (2%) as provided for in Section 207 of the Tax Code. B. Franchise tax . five per centum (5%) franchise tax, or such taxes, charges, and percentages as are specified in the special charters of grantees, whichever is higher, unless the franchise precludes the imposition of a higher tax, and two per centum (2%) franchise tax to generate, distribute and sell electric current for light, heat and power and manufacture, distribution and sale of city gas. P ayment to electric cooperative is exempt (PD 269). C. Premium tax . four per centum (4%) of premiums paid to any person doing insurance business of any sort, except on reinsurance premiums, as provided for in Section 263 of the Tax Code. 3 . Exemptions . The withholding tax herein prescribed shall not apply on money payments to (a) Government agencies or instrumentalities, including provincial, city or municipal government as well as government-owned or controlled corporation, and cdt (b) Private individuals, corporations, partnerships, and associations exempt from the payment of the taxes enumerated in Section 2 hereof. The exemption, however, shall be allowed only if the payee shall have presented to the payor government office certificate of exemption issued by the Commissioner of Internal Revenue or his authorized representative. 4 . Time of withholding . Any and all taxes specified in Section 2 hereof, on account of any money payment to any private individual, corporation, partnership and/or association, shall be deducted and withheld before the said money payment is made. 5 . Basis of computation . (a) Sales tax . The tax to be deducted and withheld shall be computed on the gross money payment to the producers or operators of mines, licensees, or permittees of quarry mines. (b) Miller's tax . The tax to be withheld on rope, sugar, coconut oil, cassava flour or starch and desiccated coconut is two per centum (2%) of the gross purchase price of the articles. (c) Contractor's tax . With respect to the sale of services by contractors, the amount subject to withholding is the gross money payment to the prime or principal contractor as the total contract price, undiminished by any amount paid to the subcontractor under a sub-contract. (d) Caterer's tax . The gross money payment for food or refreshment at 3% and at 7% on distilled spirits, fermented liquors or wines, provided that separate invoice or receipt is issued one for the sale of food or refreshment and another for the distilled spirits, etc. If the sale of food and liquor is not separately invoiced, the total money payment is subject to 7%. (e) Room occupancy tax . Gross money payment for room occupancy to proprietors, operators of hotels, motels, etc. (f) Common carrier's tax . Gross money payment to the common carrier who transports passenger or freight. (g) Franchise tax . Gross money payment to the franchise holder or grantee. (h) Broker's tax . The gross compensation or commission paid. cd i (i) Premium tax . The gross insurance premium paid. Returns and payments of taxes . No money payment shall be made by any government office or agency unless the taxes due thereon shall have been deducted and withheld under these Regulations. Taxes deducted and withheld shall be covered by the Monthly Return of Internal Revenue Taxes Withheld on Government Money Payment under RA 1051 (BIR-Form 7.50A) and paid to the Revenue District Officer, Collection Agent or duly Authorized Treasurer of the city or municipality where the paying government office or agency is located. The return, in triplicate copies, shall be filed and the payment made within ten (10) days following the close of the calendar month during which withholding was made. In places where payment thru banks is prescribed, the proper Revenue District Officer or Collection Agent shall prepare the payment acceptance order (PAO). If the payment thru banks is not prescribed, the proper Collection Agent or authorized Treasurer of the municipality shall issue the revenue official receipt for the amount of tax covered by the return. The Confirmation Receipt or the payment Acceptance Order Number as the case may be shall be indicated on the proper spaces provided for on the return. Certificate of internal revenue taxes withheld . Every withholding government office or agency shall furnish each producer, proprietor, as operator, contractor, caterer, common carrier or franchise holder from whom taxes under these regulations had been deducted and withheld, the Certificate of Internal Taxes Withheld on Money Payments (BIR-Form 7.50B). The certificates shall be accomplished in duplicate both copies to be given to the payee simultaneously with the money payment upon request, but not later than the fifteenth day of the month after the close of the calendar quarter. Nature of tax withheld . The amount of tax herein withheld and paid as evidenced by the certificate (BIR-Form 7.50B) is creditable against the sales tax or percentage tax or the franchise tax liability of the payee producer or manufacturer, contractor, etc., proprietor or operator of restaurant and other eating places and the franchise holder, provided that the amount on which the tax was withheld is included in the return as part of the gross sales or receipts for the taxable quarter or year the tax credit is availed of. Punishable acts or omission, penalties . (a) Every officer or employee of the government of the Republic of the Philippines or any of its agencies and instrumentalities, its political subdivisions, as well as government-owned or controlled corporations who, being these charged with duty to deduct and withhold any internal revenue tax and to remit the same in accordance with these regulations, is guilty of any of the delinquencies herein below specified shall be punished by a fine of not less than five thousand pesos (P5,000) and imprisonment of not less than one year nor more than two years, in addition to dismissal from service: 1. Fails or causes the failure to deduct and withhold any internal revenue tax under any of the withholding tax laws and implementing regulations. 2. Fails or causes the failure to remit taxes deducted and withheld within the time prescribed herein. 3. Fails or causes the failure to file return or certificate required. acd (b) Any person who induces or connives with any public officer or employee or official or employee of government-owned or controlled corporations to commit unlawful acts or omission stated above, as to receive any payment in violation of the law, shall be punished be a fine of not less than P1,000 nor more than P2,000 and imprisonment of not more than one (1) year. In the case of aliens, in addition to the penalties provided for, they shall be deported without further proceedings. SECTION 10 . Repealing Clause . All existing rules and regulations or parts thereof which are inconsistent with the provisions of these regulations are hereby revoked. SECTION 11 . Effectivity . These regulations shall take effect on money payments to be made beginning July 1, 1983. SECTION 12 . Transitory Provision . Until the effectivity date of these Regulations, July 1, 1983, the provisions of Revenue Regulations No. 16-77, shall govern the withholding of tax on money payments of government offices or agencies, and in accordance with the said regulations shall (a) remit the tax withheld under BIR Form 7.50; (b) furnish each payee the monthly statement of money payments, amount of tax withheld and date and number of confirmation receipt or official receipt evidencing remittance of tax withheld; and submit the list of payees to the proper revenue office as of June 30, 1983. (SGD.) CESAR A. VIRATA Minister of Finance Recommended by: (SGD.) RUBEN ANCHETA Acting Commissioner