Revised Regulations amending Revenue Regulations No. 4-83 implementing Republic Act No. 1051

October 13, 1986 REVENUE REGULATIONS NO. 20-86 SUBJECT : Revised Regulations amending Revenue Regulations No. 4-83 implementing Republic Act No. 1051 TO : All Internal Revenue Officers, Withholding Agents and Others Concerned Pursuant to the provisions of Section 277 of N ational Internal Revenue Code in relation to Section 3 of Republic Act 1051 these revised regulations are hereby promulgated to govern the manner of withholding and remitting of business, franchise and premium taxes due on account of money payments to be made by government offices, instrumentalities and agencies. casia 1 . 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, partnerships and/or associations, deduct and withhold the taxes due from the said payees on account of such money payments. 2 . Definitions of terms . As used herein the following terms shall have the meaning hereunder indicated: (a) "Original sale". The first sale, barter, exchange or transfer of an article by the person liable to excise, (specific and/or ad valorem ) manufacturer's, producer's, importer's or miller's percentage tax. (b) "Subsequent sale". The sale, barter, exchange, transfer or similar transaction for nominal or valuable consideration intended to transfer ownership of or title to any domestically acquired article where such article has not undergone any further processing or transformation by the transferor or seller. (c) "Gross selling price". The gross value in money or its equivalent which the vendee pays to the vendor for the goods. 3 . Internal revenue taxes required to be withheld . The following taxes, the amount of which can be fixed, determined, computed or ascertained are subject to withholding: A. Business tax 1. Sales tax on original sale : Sales tax on gross money payments to producers for every original domestic sale, barter, exchange or transfer of: (a) In general, mineral, mineral products and quarry resources, except gold and other precious metals; and forest products, twenty per centum (20%) of the gross selling price thereof as provided for in Section 163 (4) (b) Logs, bamboos, sand and gravel ten per centum (10%) of the gross selling price thereof as provided for in Section 163 (2) 2. Sales tax on subsequent sales : (1) Sales tax on gross money payments to subsequent sellers of domestically acquired article at the rate of 1-1/2% of gross selling price or gross value in money of the articles sold as provided for in Section 164 of the Tax Code. Provided: However , That the sale of the following articles not subject to sales tax on subsequent sales shall not be subject to withholding. (a) Manufactured oils and other fuels, except lubricating oil, processed gas, grease, wax and petroleum; (b) Any newspaper, magazine, review, or bulletin which appear at regular intervals, with fixed prices for subscription and sale and which is not devoted principally to publication of advertisements. 3. Percentage tax on gross money payments to : (a) proprietors or operators of rope factories, sugar centrals and mills, coconut oil mills, palm oil mills, cassava mills, and desiccated coconut factories, three per centum (3%) of the actual selling price or market value of the articles produced, processed, or manufactured as provided for in Section 168 of the Tax Code. (b) contractors, proprietors, or operators of dockyards and others at four per centum (4%) as provided for in Section 170 of the Tax Code. 1. General engineering, general building and specialty contractors as defined in Republic Act Numbered Four Thousand Five Hundred Sixty Six; 2. Filling, demolition and salvage work contractors; and proprietors or operators 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 contracts 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 machine or any mechanical contrivance; 10. Proprietors or operators of tailorshops, dresshops, milliners and hatters, beauty parlors, 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, smiths, and house or sign painters; 14. Printers, bookbinders, lithographers and publishers except publishers of books and those engaged in the publication or printing and 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 Board of Investments under Republic Act No. 5186. (As amended by PD No. 1457, June 11, 1978); and 16. Lessors of personal properly except non-resident owners of property subject to the final tax under Section 24 (b) (vii) of this Code. (As amended by PD No. 1457, June 11, 1978.) The term "independent contractors" includes persons (juridical or natural) not enumerated above (but not including individuals subject to the occupation tax under Section 12 of the Local Tax Code) whose activity consists essentially of the sale of all kinds of services for a fee regardless of whether or not the performance of the services calls for the exercise or use of the physical or mental faculties of such contractors or their employees. (c) proprietors, operators or keepers of hotels, motels, rest houses, pension houses, lodging houses and resorts, twelve per centum (12%) as provided for in Section 171 of the Tax Code. (d) proprietors or operators of restaurants, refreshments, parlors including clubs and caterers, four or eight per centum (4%) or (8%) as provided for in Section 172 of the Tax Code. (e) common carriers, by land, air, or water except owners of bancas and owners of animal drawn through fields vehicles three per centum (3%) as provided for in Section 173 of the Tax Code. (f) stock, real estate, commercial and customs brokers, seven per centum (7%) as provided for in Section 174 of the Tax Code. B. Franchise tax . Five per centum (5%) franchise tax, or such taxes, charges, and percentages as are specified unless in the special charters of grantees whichever is higher, unless the franchise preclude 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, d istribution and sale of city gas. Payments to electric cooperative is exempt (PD 269). C. Premium tax . Five per centum (5%) of premiums paid to any person doing insurance business of any sort, except on reinsurance premiums, as provided for in Section 223 of the Tax Code. (See RMC No. 2-87 dated Jan. 14, 1987 correcting the rate from 6%.) 4 . Exemptions . The withholding tax herein prescribed shall not apply on money payments to (a) Government agencies or instrumentalities, including provincial, city or municipal government received in the exercised of their governmental functions. (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 representatives. 5 . Basis of computation . (a) Sales tax on original sale . The tax to be deducted and withheld shall be computed on the gross money payments to the seller; Provided, however , that where the sales tax is correctly and separately billed in the invoice, the amount to be withheld shall be that which is separately billed. (b) Sales tax on subsequent sale . The tax to be deducted and withheld shall be computed on the gross money payment to the subsequent sellers of articles subject to tax on subsequent sale; Provided, however , that where the sales tax is correctly and separately billed in the invoice, the amount to be withheld shall be that which is separately billed. (c) Contractor's tax . With respect to the sale of services by contractors, the amount subject to withholding is the gross money payments to the prime or principal contractor as the total contract price, undiminished by any amount paid to the subcontractor under a subcontract. (d) Caterer's tax . The gross money payment for food or refreshment of 4% and at 8% 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 8%. (e) Room occupancy tax . Gross money payments for room occupancy to proprietors, operators of hotels, motels, etc. (f) Common carrier's tax . Gross money payments to the common carrier who transport passenger or freight. (g) Franchise tax . The gross money payment to the franchise holder or grantee. (h) Broker's tax . The gross compensation or commission paid. (i) Premium tax . The gross insurance premium paid. 6 . 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. acd 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. 7 . Certificate of internal revenue taxes withheld . Every withholding government office or agency shall furnish each producer, proprietor, or 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 certificate 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. 8 . 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 of 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. 9 . Punishable acts or omissions, 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 the 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 (P5,000.00) 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. (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 omissions stated above, as to receive any payment in violation of the law, shall be punished by 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 immediately. (SGD.) JAIME V. ONGPIN Minister of Finance Recommending Approval: (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue