Withholding of Creditable Value-Added Tax
Republic Act No. 7649, enacted on April 6, 1993, mandates that the Philippine government and its subdivisions, including government-owned and controlled corporations (GOCCs), must withhold a value-added tax (VAT) of 3% on gross payments for goods and 6% on gross receipts for services rendered by contractors. This tax is to be deducted before payment is made and is creditable against the contractor's VAT liability. The withheld VAT must be remitted within ten days following the end of the month in which the withholding occurred. The Act also empowers the Secretary of Finance to issue necessary regulations for its implementation and repeals any inconsistent laws or regulations. It took effect fifteen days after publication in official media.
April 6, 1993
REPUBLIC ACT NO. 7649
AN ACT REQUIRING THE GOVERNMENT OR ANY OF ITS POLITICAL SUBDIVISIONS, INSTRUMENTALITIES OR AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS (GOCCs) TO DEDUCT AND WITHHOLD THE VALUE-ADDED TAX DUE AT THE RATE OF THREE PERCENT (3%) ON GROSS PAYMENT FOR THE PURCHASE OF GOODS AND SIX PERCENT (6%) ON GROSS RECEIPTS FOR SERVICES RENDERED BY CONTRACTORS
SECTION 1. Section 110 of the National Internal Revenue Code, as amended by Republic Act No. 7643, is hereby further amended by adding a new paragraph (c) thereunder to read as follows: casia
"(c) Withholding of Creditable Value-Added Tax. — The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or -controlled corporations (GOCCs) shall, before making payment on account of its purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 100 and 102 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every release or installment payment which shall be creditable against the value-added tax liability of the seller or contractor.
"The value-added tax withheld under this section shall be remitted within ten (10) days following the end of the month the withholding was made."
SECTION 2. The Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate the necessary rules and regulations for the effective implementation of the provisions of this Act. casia
SECTION 3. All laws, decrees, orders, rules and regulations, and other issuances inconsistent with this Act are hereby repealed or amended accordingly.
SECTION 4. This Act shall take effect fifteen (15) days after its complete publication in the Official Gazette or in at least two (2) national newspapers of general circulation, whichever comes earlier.
Approved: April 6, 1993
Published in Malaya and the Philippine Times Journal on April 10, 1993 and in the Manila Times on April 19, 1993. Published in the Official Gazette, Vol. 89 No. 19 page 2446 on May 10, 1993.