Revised and Consolidated Expanded Withholding Tax Regulations

May 2, 1985 REVENUE REGULATIONS NO. 06-85 SUBJECT : Revised and Consolidated Expanded Withholding Tax Regulations TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of Section 326 in relation to Section 53(f) both of the National Internal Revenue Code of 1977, as amended, the following Regulations to be known as REVISED AND CONSOLIDATED EXPANDED WITHHOLDING TAX REGULATIONS are hereby promulgated to implement the withholding of creditable income taxes from certain income payments and the additional requirement for deductibility of such income payments which are otherwise deductible from gross income of the payor. Income payments subject to creditable withholding tax and rates prescribed thereon . Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (a) Professional fees, talent fees, etc., paid to individuals . On the gross professional, promotional and talent fees or any other form of remuneration paid to the following individuals - ten per centum (10%): aisa dc "(1) Those individually engaged in the practice of professions or callings: Lawyers; certified public accountants; doctors of medicine; architects, civil, electrical, chemical, mechanical, structural, industrial, mining, sanitary metallurgical and geodetic engineers and marine surveyors; doctors of veterinary science; dentists, professional appraisers; connoisseurs of tobacco; actuaries; and interior decorators; (2) Professional entertainers such as actors and actresses, singers and emcees. The term actors and actresses shall not include "bit players," "extras" and "radio talents and character players" whose roles or performances in a movie, television or radio program or stage presentation are subordinate to the actors or actresses and to whom payments are made per role or performance, or where the aggregate payment by the same payor in a taxable year does not exceed two thousand pesos (P2,000.00) (3) Professional athletes including basketball players, pelotaris and jockeys; (4) All directors involved in movies, stage, radio, television, and musical productions; (5) Insurance agents and Insurance adjusters; (6) Management and technical consultants; (7) Business and bookkeeping agents and agencies; (8) Other recipients of talent fees; The amounts subject to withholding under this paragraph shall include not only fees, but also per diems, allowances and any other forms of income payments. In the case of professional entertainers, athletes, and all recipients of talent fees, the amount subject to withholding tax shall also include amounts paid to them in consideration for the use of their names or pictures in print, broadcast and other media or for public appearances, for purposes of advertisements and sales promotion." (b) Professional fees, talent fees, etc., paid to taxable juridical persons . On the gross professional, promotional and talent fees, or any other form of remuneration enumerated in the preceding sub-paragraph paid to taxable juridical persons - five per centum (5%). Rentals . Where the gross rental paid or payable for the continued use or possession of real property to which the payor or obligor has not taken or is not taking title or in which he has no equity, amounts to at least five hundred pesos (P500.00) - five per centum ( 5% ) (d) Cinematographic film rentals and other payments On the gross payments to resident individuals and corporate cinematographic film owners, lessors or distributors - five per centum (5%) (e) Amounts paid to certain contractors. On gross payments to the following contractors, whether individual or corporate one per centum (1%): 1. General engineering, general building and specialty contractors "(a) General engineering contractors Those whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill including the following divisions or subjects: "1. Reclamation works; "2. Railroads; "3. Highways, streets and roads; "4. Tunnels; "5. Airports and airways; "6. Waste reduction plants; "7. Bridges, overpasses, underpasses, and other similar works; "8. Pipelines and other systems for the transmission of petroleum and other liquid or gaseous substances; "9. Land levelling; "10. Excavating; "11. Trenching; "12. Paving; and "13. Surfacing work. "(b) General Building contractors Those whose principal contracting business is in connection with any structure built, for the support, shelter, and enclosure of persons, animals, chattels or movable properties of any kind, requiring in its construction the use of more than two unrelated building trades or crafts, or to do or superintend the whole or any part thereof. Such structures includes sewers and sewerage disposal plants and systems, parks, playgrounds and other recreational works, refineries, chemical plants and similar industrial plants requiring specialized engineering knowledge and skill, powerhouse, power plants and other utility plants and installation, mines, and metallurgical plants, cement and concrete works in connection with the above mentioned fixed works. "(c) Specialty Contractors. Those whose operations pertain to the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts. cd i 2. Other Contractors "(a) Filing, demolition and salvage work contractors and operators of mine drilling apparatus; "(b) Operators of dockyards; "(c) Persons engaged in the installation of water system, and gas or electric light, heat or power; "(d) Operators of stevedoring, warehousing or forwarding establishments; Transportation contractors for the carriage of goods and merchandise of whatever kind by land, air, or water; "(f) Printers, bookbinders, lithographers and publishers except those principally engaged in the publication and printing of any newspaper, magazine, review or bulletin which appears at regular intervals, with fixed prices for subscription and sale; "(g) Messengerial, janitorial, private detective and/or security agencies and credit and/or collection agencies; Advertising agencies, exclusive of the amount paid or payable to media; cd i Independent producers of television, radio and stage performances or shows; Independent producers of "jingles"; "(k) Labor recruiting agencies; Persons engaged in the installation of elevators, central air-conditioning units, computer machines and other equipment and machineries and the maintenance services thereon; Persons engaged in the sale of computer services; Persons engaged in landscaping services; and "(o) Persons engaged in the collection and disposal of garbage." (f) Income distribution to the beneficiaries On income distributed to the beneficiaries of estates and trusts as determined under Section 57 of the National Internal Revenue Code, except such income already subject to final withholding tax - fifteen per centum (15%) (g) Amounts paid to certain brokers and agents On gross payments to customs, insurance, real estate and commercial brokers and agents of professional entertainers - five per centum (5%) 2 . Persons required to deduct and withhold . The following persons are hereby constituted as withholding agents for purposes of the tax required to be withheld on income payments enumerated in the preceding section: aisa dc (a) An individual, with respect to payments made in connection with his trade or business; (b) Any juridical person, whether or not engaged in trade or business; and (c) All government offices including government-owned or controlled corporations as well as provincial, city and municipal governments. 3 . Time of withholding . The obligation of the payor to deduct and withhold under these regulations arises at the time an income which is subject to withholding under Section 1 hereof is payable or paid. 4 . Exemption from withholding . The withholding of tax herein prescribed shall not apply to income payments of the following: (a) National government and its instrumentalities, including provincial, city or municipal governments, (b) Persons enjoying income tax exemptions; and (c) Exempt organizations under Section 27 of the National Internal Revenue Code, as amended, except income derived from real or personal property, or from any activity conducted for profit. casia "The exemption shall be allowed only if the payee above-mentioned in sub-paragraphs (b) and (c) shall have presented to the payor a certificate of exemption issued by the Commissioner of Internal Revenue." 5 . Monthly return and payment of taxes withheld at source . (a) The taxes herein deducted and withheld shall be paid upon filing a return in duplicate under BIR form with the Revenue District Officer or the Collection Agent of the City or duly authorized Treasurer of the Municipality where the withholding agent has his legal residence or principal place of business except in cases where the Commissioner of Internal Revenue allows otherwise. The required return shall be filed within ten days (10) after the end of each month. The taxes deducted and withheld by the withholding agents shall be considered trust funds and shall be maintained in a separate account and not commingled with any other fund of the withholding agent and held in trust for the government until paid to the collection officer. Annual return of income tax withheld at source . The payor is also required to file with the Commissioner of Internal Revenue, Withholding Tax Division, Revenue Regional Director, Revenue District Officer, Collection Agent of the city or municipality in which the payor has his legal residence or principal place of business, or where the government office is located, on or before the 1st day of March of the year next following the year in which payments were made, an annual return of income tax withheld at source (BIR Form 1743-B), showing the following information: (1) The official receipt, date of payment and amount for each month; (2) Name, address and taxpayer's account number of payees; and (3) Nature of income payment, gross amount and amount of tax withheld from each payee . cd i If the payor is the government of the Philippines or any political subdivision or agency thereof or government-owned or controlled corporation, the return prescribed (1743-A1) and (BIR Form 1743-B) shall be made by the officer or employee having control of the payments or by any duly designated officer or employee. Any person subject to the requirements of these regulations shall be exempt from compliance of the requirements of Section 77 of the National Internal Revenue Code and the regulations thereunder with respect only to payments from which tax have been withheld. 6 . Statement of income payments made and taxes withheld . Every withholding agent required to deduct and withhold taxes under these Regulations shall furnish each recipient, in respect to his or its receipts during the calendar quarter or year a written statement (BIR Form 1743.1) showing the income or other payments made by the withholding agent during such quarter or year, and the amount of the tax deducted and withheld therefrom. Such statement (BIR Form 1743.1) shall be furnished the corporate payee not later than the 20th day following the close of the quarter in which payment was made not later than March 1 of the following year in the case of individual payee. However, upon request, the payor shall be obliged to furnish such statement to the payee simultaneous with the income payment. "The amount so withheld shall be allowed as a tax credit against the income tax liability of the payee in the taxable quarter or year in which the income was earned or received." 7 . Verification of returns and statements . Any return, statement or other document required to be filed under these regulations shall be contain or be verified by a written declaration that it is made under the penalties of perjury and this declaration shall be in lieu of any oath otherwise required. 8 . Any failure to comply with these regulations shall be subject to ad valorem and specific penalties. (1) Ad valorem penalties (a) Surcharges for failure to render returns, and for rendering false or fraudulent returns; delinquency in payment of taxes . In case of failure to make and file a return within the time prescribed herein, not due to willful neglect, there shall be added to the tax twenty five (25) per centum of the amount of such tax, except that when a return is voluntarily and without notice from the Commissioner or any other revenue officer filed after such time, and it is shown that the failure to file it was due to reasonable cause, no such addition shall be made to the tax. "In case the failure to make and file a return is due to willful neglect or in case a false or fraudulent return is willfully made, there shall be added to the tax or to the deficiency tax to be remitted, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum (50%) of the amount of such tax or deficiency tax." (b) Surcharge and interest for failure to deduct and withhold . If the withholding agent, in violation of the provisions of these regulations, fails to deduct and withhold the amount of tax required to be withheld, he shall be liable to pay in addition to the tax required to be deducted and withheld, a surcharge of fifty per centum if the failure is due to willful neglect or with intent to defraud the government, or twenty five per centum if the failure is not due to such cause, plus interest at the rate of fourteen per centum per annum from the time the tax is required to be withheld until the date of assessment. (c) Surcharge and interest for the non-payment of taxes withheld . In case the taxes deducted and withheld are not paid within the time prescribed, there shall be added to the amount of the unpaid tax a surcharge of twenty five per centum plus interest at the rate of twenty per centum per annum from the date the same became due until paid. If the withholding agent is the government or any of its agencies, political subdivisions or instrumentalities or a government-owned or controlled corporation, the employee thereof responsible for the withholding an remittance of tax shall be personally liable for the surcharge and interest imposed on herein. (2) Specific penalties (a) Penalties for failure to file return and for filing fraudulent returns or statements, or to pay tax . Any payor liable to pay or remit the tax, to make a return or to furnish the statement of income payment and taxes withheld from the payee required under these Regulations, who refuses or neglects to pay such tax, to make such returns at the time or times herein specified shall be punished by a fine of not more than two thousand pesos (P2,000) and by imprisonment of not more than six (6) months. "If the withholding agent is the government or any of its agencies, political subdivisions or instrumentalities or a government-owned or controlled corporation, the employee thereof responsible for withholding and remittance of the tax shall be punished by a fine of not less than five thousand pesos (P5,000) a nd imprisonment of not less than one year nor more than two years.(E.O. 65 1) acd "Any individual or any officer of any corporations or general co-partnership required by law to make, render, sign, and verify return, who makes any false or fraudulent statement with intent to defeat or evade withholding under these regulations, shall be punished by fine of not more than five thousand pesos (P5,000) and imprisonment of not less than two (2) years. If any corporation or duly-registered co-partnership shall refuse or neglect to make a return at the time or times herein before specified, or shall render a false or fraudulent return, such corporation or partnership shall be liable to a fine of not exceeding twenty thousand pesos (P20,000). 9 . Requirement for deductibility . Any income payment, which in otherwise deductible manner under Sections 30 and 57 of the tax code, as amended, shall be allowed as a deduction from the payor's gross income only if it is shown that the tax required to be withheld has been paid to the Bureau of Internal Revenue in accordance with Sections 53, 54, 91 and 93 also of the Tax Code. aisa dc 10 . Claims for tax credit or refund . Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and the fact of withholding is established by a copy of the statement duly issued by the payor to the payee (BIR Form no. 1743.1) showing the amount paid and the amount of tax withheld therefrom. SECTION 11 . Repealing Clause . All rules and regulations or parts thereof inconsistent with the provisions of these regulations are amended accordingly. SECTION 12 . Effectivity . These regulations shall apply to income payments made beginning July 1, 1985. (SGD. CESAR E.A. VIRATA Minister of Finance Recommending Approval: (SGD.) RUBEN B. ANCHETA Acting Commissioner