Trial and error with the TRAIN law



Early this year, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular No. (RMC) 01-2018, revising withholding tax rates on certain income payments to individual payees. A few months after its effectivity and one month before the filing deadline (April 30, 2018) for the first quarterly expanded/creditable withholding tax return (BIR Form No. 1601EQ), the BIR released yet another issuance—Revenue Regulations No. (RR) 11-2018—canceling the said amendment and further amending certain provisions of RR 2-98, as amended, for further implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Below are the revised withholding tax rates introduced by RR 11-2018:

To avail of the lower withholding tax rate, RR 11-2018 requires the submission of the Sworn Declaration of Gross Receipts/Sales, along with a copy of the Certificate of Registration (COR) for income payees of professional fees/commissions/talent fees, etc., whose gross receipts/sales in a taxable year shall not exceed the threshold.
Said submission should be made to all the income payors/withholding agents not later than January 15 of each year, or at least prior to the initial payment.

The higher withholding tax rate shall be applied if: (1) the payee failed to provide such declaration; or (2) the income payment exceeds the threshold, notwithstanding the submission of such sworn declaration. The sworn declaration of the non-individual payees shall be executed by the president/managing partner, whichever is applicable.

An individual income earner/payee, whose gross income is less than P250,000 in a taxable year and comes from a lone income payor, shall be exempt from withholding tax, provided he submits a sworn declaration and COR.

Otherwise, the income payment shall be subject to the applicable withholding tax even if it is P250,000 or below.

In the event that the individual payee’s cumulative gross receipts in a year exceed P250,000, the income payor/withholding agent shall withhold the prescribed withholding tax based on the amount in excess of P250,000, despite the prior submission of the sworn declaration.

The income payors/withholding agents are required to submit an Income Payor/Withholding Agent’s Sworn Declaration and a List of Payees from whom sworn declaration and COR are received, to the concerned BIR office on or before January 15 of each year, or 15 days following the month when a sworn declaration is received from a new income recipient.

For expanded/creditable withholding tax return filing covering the first quarter (Q1) of 2018, income payees who wish to avail of exemption or the lower withholding tax rate shall submit sworn declarations and CORs to income payors/withholding agents until April 6, 2018. Meanwhile, income payors/withholding agents have until April 20, 2018 to submit their own sworn declarations, together with the List of Payees and copies of CORs, to their concerned BIR offices.

Furthermore, income payors/withholding agents shall refund to the income payees any excess income tax withheld for the first two months of 2018, either due to change in withholding tax rates or to qualifications to avail of exemption. The refund shall be reflected as an adjustment to the withholding tax due for the quarter and on the attached Alphabetical List of Payees. A list of payees subject to refund shall likewise be attached therein.

Any issued Certificate of Tax Withheld at Source (BIR Form No. 2307) should be returned to the payor upon receipt of the refund and corrected Certificate, if still applicable. In no case shall income payee use the Certificate for the same amount of income payment from the same income payor/withholding agent and for the same period.

Another notable amendment in RR 11-2018 is the inclusion of Medium Taxpayers and those under the Taxpayer Account Management Program (TAMP) to withholding tax agents required to withhold 1 percent and 2 percent from regular suppliers of goods and services, respectively, and casual purchases worth P10,000 or more. The Medium Taxpayers and TAMP shall now be classified as Top Withholding Agents, together with the taxpayers duly notified by the Commissioner as any of the following unless previously de-classified as such or has already ceased business operations: (a) Large taxpayer under RR 1-98, as amended; (b) Top 20,000 private corporations under RR 6-2009; or (c) Top 5,000 individuals under RR 6-2009.

The top withholding agents shall be published in a newspaper of general circulation or posted in the BIR website.
The obligation to withhold shall commence on the first day of the month following the month of publication.

The above changes should be taken into consideration when preparing and filing BIR Form No. 1601E for Q1 2018. With the filing deadline fast approaching, let us hope the BIR sticks to these new regulations and issues no further amendments anytime soon.

The author is a senior with the Tax & Corporate Services division of Navarro Amper & Co., the local member firm of Deloitte Southeast Asia Ltd. – a member firm of Deloitte Touche Tohmatsu Limited – comprising Deloitte practices operating in Brunei, Cambodia, Guam, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.


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