Revised Regulations Governing the Manner of Withholding Taxes on Payments Made by Government Entities to Private Parties

October 11, 1977 REVENUE REGULATIONS NO. 16-77 SUBJECT : Revised Regulations Governing the Manner of Withholding Taxes on Payments Made by Government Entities to Private Parties as Provided for in Republic Act No. 1051 TO : All Internal Revenue Officers, Withholding Agents and others concerned Pursuant to the provisions of Section 3 of Republic Act No. 1051, the following revised regulations are hereby promulgated to govern the manner of withholding taxes from payments made by government entities to private individuals, corporations, partnerships, and/or associations including joint ventures contemplated in Presidential Decree No. 929 as provided for in Republic Act No. 1051 and Executive Order No. 210 and shall be known to Revenue Regulations No. 16-77. SECTION 1. Purpose and Scope . These regulations propose to establish a uniform procedure on the deduction and withholding of taxes due on payments made by all bureaus, offices, agencies and instrumentalities of the government, including government-owned or controlled corporations, provinces, cities and municipalities, where the tax on payments can be fixed, determined, computed or ascertained. SECTION 2. Entities required to deduct and withhold taxes . Only government bureaus, offices, agencies and instrumentalities of the government, including government-owned or controlled corporations, provinces, cities and municipalities are required to deduct and withhold the taxes due before making any payment to any private individual, corporation, partnership and/or associations and joint ventures as contemplated in Presidential Decree No. 929. SECTION 3. Persons whose transactions are liable to withholding tax . Private individuals, corporations, partnerships, associations and/or joint ventures contemplated in Presidential Decree No. 929 who have transactions with the Philippine government, or any of its branches or agencies either as contractors of services, producers or manufacturers who have sold originally produced or manufactured materials, wares or goods. aisa dc SECTION 4. Internal revenue taxes that should be withheld . The following internal revenue taxes that can fixed, determined, computed or ascertained at the time of payment shall be deducted and withheld from said money payments: a. Business Tax : 1. Sales tax due from producers or manufacturers provided for in Sections 194, 195, 196, 197, 198, 199 and 201 of the National Internal Revenue Code of 1977. The sales tax due from producers and manufacturers allowed to deduct the cost of raw materials used shall be withheld only if billed separately in the invoice/s. However, in the case of producers of ordinary articles under Section 199 not allowed any deduction for raw materials used, the sales tax shall be withheld on the basis of the gross sales thereof. 2. Percentage tax due from proprietors of rope factories, sugar centrals and mills, coconut oil mill, cassava mills and desiccated coconut factories computed at 2% of the actual selling price or market value of all rope, sugar, coconut oil, cassava flour or starch, and desiccated coconut, including its by-products, manufactured, processed or milled by them, as provided under Section 203 of the Tax Code. 3. Percentage tax due from contractors, proprietors or operators of dockyards and other contractors computed at 3% of their gross receipts, as provided under Section 205 of the Tax Code. Provided that in joint venture contemplated under Presidential Decree No. 929, the 3% tax shall be based on the entire amount to be paid to the principal contractor. 4. Percentage tax due on the gross receipts of caterers as provided under Section 206 of the Tax Code. 5. Percentage tax due on common carriers by land, air and water computed at 2% of their monthly gross receipts as provided under Section 207 of the Tax Code. b. Franchise Tax : Percentage tax due on franchise holders computed at 5% of the gross receipts from business covered by the law granting the franchise, or such taxes, charges and percentages as are specified in the special charters of the grantees upon whom such franchises are conferred, whichever is higher, unless the provisions thereof preclude the imposition of a higher tax as provided under Section 267 of the Tax Code. c. Charges on Forest Products : These charges are due on all forest products which should be paid by the forest concessionaires. They vary according to the group or class the forest products belong. In the case of timber cut from public forest, the charges due thereon as prescribed in Section 272 of the Tax Code are as follows: 1. On ebony stripped of sapwood P16.00/cu. m. 2. On camagong stripped of sapwood 5.00/cu. m 3. On molave stripped of sapwood 4.00/cu. m 4. On timber of first group except those above 3.50/cu. m 5. On timber in second group 2.00/cu. m 6. On timber in third (not including firewood) 1.25/cu. m 7. On timber in fourth group (not including firewood 0.60/cu. m Forest charges on other forest products as well to those classified as minor products may be found in the List of Administrative Schedules and Forest Products Regulations issued by the Secretary of Finance. SECTION 5. Duties of the withholding officer . a. Amounts withheld pursuant to these regulations by any government office or government owned or controlled corporations on money payments to private individuals, corporations, partnerships, or associations and joint ventures contemplated in Presidential Decree No. 929 referred to in Section 2 hereof, shall be remitted to the nearest revenue collection agent within the first ten (10) days of the month following that when such money payment was made. The revenue collection agent shall issue a revenue official receipt (ROR) or revenue tax receipt (RTR) as the case may be. In all cases, the revenue official receipt or the revenue tax receipt should be in the name of the government office or entity that withheld the tax and the kind and nature of the tax and for what contract as well as the period covered by the payment should be indicated thereon. b. Every remittance of the taxes withheld under these regulations shall be covered by a return (BIR Form 7.50, revised, August, 1977) and must be filed with the revenue collection agent of the City or Municipality where the government agency withholding the tax has its Office. SECTION 6. The withholding officer shall furnish each payee a monthly statement of the total money payments, the corresponding taxes withheld therefrom and the number and the date of revenue official receipt/s or revenue tax receipt/s evidencing remittances thereof to the Revenue Collection Agent. SECTION 7. Annual Report . a. All government offices including government-owned or controlled corporations as well as provincial, city and municipal governments shall submit in duplicate an annual list of money payments to private individuals, corporations, partnerships, associations and joint ventures contemplated in Presidential Decree No. 929 on or before January 31 of the succeeding year covering transactions of the preceding year. b. The annual list shall contain the following information: 1. Name and address of the government office which effected the payment; 2. Name, address and taxpayer account number of the individual, corporation, partnership, association or joint ventures contemplated in Presidential Decree No. 929 with which it had transactions and to which money payment was made; 3. Total amount of payment/s made during the preceding year; 4. Nature of the transaction or payment; 5. Date/s when payment was made; and 6. Internal revenue tax withheld therefrom, showing the number, date and amount of the official receipt evidencing the remittance thereof to the Revenue Collection Agent. c. This annual report shall be certified correct and signed by the head of office concerned or by any duly authorized responsible official. SECTION 8. Processing and Control of Returns/Reports, and Verification thereof . All monthly withholding tax returns (BIR Form No. 7.50), shall be transmitted by the Revenue Collection Agent concerned to the Regional Director within ten (10) days from receipt hereof. The annual report prescribed under Section 7 hereof shall be submitted by the government agency concerned direct to the Regional Director of the region where the former is stationed, within 30 days after the end of the calendar year. The original of the annual report, together with the original of all monthly withholding tax returns shall be transmitted by the Regional Director on or before the 15th day of February of the year following the period covered by the report, to the Withholding Tax Division for processing after which the same shall be forwarded to the Data Processing Center for collating of the information on all money payments made to a particular taxpayer, thereafter to be referred to the corresponding Regional Offices or National Investigating Divisions for cross-checking of the collated data against the return filed by the taxpayer. The duplicate copies of the herein mentioned reports shall be kept in file in the Assessment Branch of the Regional Office for reference purposes. SECTION 9. Exemption . Only the transactions/contracts enumerated in Section 4 hereof are subject to the withholding provisions of Republic Act No. 1051. Those not mentioned therein are deemed exempted; Provided, however, that in cases of transactions/contracts not mentioned in the aforesaid Section 4 in which there is doubt as to whether or not a tax should be withheld, the withholding officer shall require the payee to secure a "Certificate of Tax Exemption" from the nearest Revenue District Officer or Revenue Regional Director. SECTION 10. Acts Constituting Violations . a. Unlawful acts may be committed by the public officer or employee, or an official or employee of a government-owned or controlled corporation when he: 1. Fails to withhold the tax before making any money payment; 2. Fails to file the withholding tax return within the time prescribed by law; and 3. Fails to remit the taxes withheld on time. b. It shall be equally unlawful for any person or persons to: 1. Induce or connive with any public officer or employee, or an official or employee of a government-owned or controlled corporation to commit the unlawful acts stated above; or 2. Receive any payment in violation of the provisions of the law. SECTION 11. Penalties for Violation Any violation of the provisions of Republic Act No. 1051, as implemented by this Revenue Regulation, shall be punished by a fine of not less than one thousand pesos nor more than two thousand pesos and imprisonment for not more than one year; Provided, that, in the case of a public officer or employee, he shall be further subject to administrative proceedings and, if found guilty, shall be dismissed from the service; Provided, further, that in case of aliens, in addition to the penalties provided for in this Section, they shall be deported without further deportation proceedings. SECTION 12. Repealing Clause . All existing rules and regulations or parts thereof which are inconsistent with the provisions of these regulations are hereby revoked. SECTION 13. Effectivity . These regulations shall become effective upon approval hereof. CESAR VIRATA Secretary Recommended by: EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8 ANNEX INSTRUCTIONS This return shall be accomplished by every government office, bureau, agency or instrumentality for taxes withheld on money payments to contractors, producers or manufacturers as required under Revenue Regulations No. 16-77. This return shall be filed in duplicate and the amount of taxes withheld shown thereon remitted to the Commissioner of Internal Revenue, or the City of Municipal Revenue Collection Agent within ten (10) days of the month following that when such payment was made to the contractor, producer or manufacturer. 1st Indorsement November 17, 1977 Respectfully returned to the Commissioner of Internal Revenue, Quezon City, the within proposed Revenue Regulation No. 16-77 dated October 11, 1977 entitled "Revised regulations governing the manner of withholding taxes on payments made by government entities to private parties as provided for in Republic Act No. 1051", duly approved. CESAR VIRATA Secretary