CREDITABLE WITHHOLDING TAX Flashcards
What are the types of income payments subject to Creditable Withholding Tax?
- Professional fees for services rendered, which include:
a. Talent fees
b. Professional fees paid to medical practitioners by
hospitals and clinics or paid directly by health
maintenance organizations and/or similar
establishments.
c. Income payments to certain brokers and agents
d. Commissions of independent and/or executive
sales representatives and marketing agents of
companies. - Income distribution to beneficiaries
- Income payments to partners of General Professional Partnerships
What is the CWT rate under TRAIN law for Professionals?
- If INDIVIDUAL
a. The gross income for the year DOES NOT EXCEED
3,000,000 - 5%
b. The gross income for the year EXCEEDS
3,000,000 - 10% - If NON-INDIVIDUAL
a. The gross income for the year DOES NOT EXCEED
720,000 - 10%
b. The gross income for the year EXCEEDS 720,000 -
15%
What is the CWT rate under TRAIN law for income distributed to beneficiaries of estates and trusts?
15% on income, excluding those subject to FWT and tax-exempt income.
What is the CWT rate under TRAIN law for income payments to partners of general professional partnerships?
a. The gross income for the year DOES NOT EXCEED
720,000 - 10%
b. The gross income for the year EXCEEDS 720,000 -
15%
T or F
Partners of GPPs can opt to be taxed at the 8% preferential tax income.
False.
Explain the requirements under the new CWT under TRAIN law.
To be eligible for the lower rates, taxpayers must submit a sworn declaration that their income does not exceed the relevant threshold (i.e. PHP 3 million for individual taxpayers; PHP 720,000 for other taxpayers), along with a copy of the certificate of registration (COR), to all income payers/withholding agents before the date of the first payment or by 15 January each year at the latest. Where the payee fails to do so or the income payment exceeds the relevant threshold, the higher rate (10%/15%, as appropriate) will apply.
Income payers also are required to execute a sworn declaration listing those payees from whom they have received sworn declarations and submit this to the BIR office with whom they are registered on or before 31 January each year or 15 days following the end of the month in which a new income recipient has submitted the payee’s sworn declaration.
Where an individual payee only receives income from a single payer and the total amount received in a taxable year is less than PHP 250,000, an exemption from withholding tax may apply. Where the payee fails to submit the required sworn declaration of income or the payment exceeds PHP 250,000, CWT will be withheld. Under transitional provisions for 2018, the sworn declaration and COR must be submitted by the payee to the income payer by 6 April 2018. The payer in turn must submit the information to the BIR by 20 April 2018. Any excess tax will be refunded to the payee by the payer, who will reflect the amount refunded as an adjustment to the remittable withholding tax due for the first quarter withholding tax return. The payer must submit a list of payees receiving a refund, either resulting from the retroactive change to the CWT rates or the exemption, to the BIR by 30 April 2018. A certificate of tax withheld at source (BIR Form No. 2307) showing the final amount of tax withheld must be given by the payer to the payee within 20 days after the end of the first quarter.
Amounts received by a minimum wage earner from his/her employer in addition to regular salary (e.g. commissions, honoraria, fringe benefits, benefits in excess of the allowable statutory amount of PHP 90,000 and taxable allowances) or from other employments/professions are subject to CWT, unless expressly exempt (i.e., statutory minimum wage, overtime pay, night shift differential, holiday pay and hazard pay).
Employees of area or regional headquarters of multinational corporations, regional operating headquarters, offshore banking units, and petroleum contractors and subcontractors are subject to CWT in the same way as Philippines citizens and resident individuals.
An employee who qualifies for the substituted filing of income tax return (BIR Form 1700) is not required to submit an individual return. Instead, a copy of the certificate of compensation payment and tax withheld (BIR Form 2316), signed by both the employer and the employee, is submitted by the employer to the relevant BIR office by 28 February of the following year. Other employees must submit an income tax return by 15 April of the following year.
Withholding tax agents – filing and payment obligations
Withholding tax returns (BIR Form No. 1601EQ for creditable withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603 for final tax withheld on fringe benefits, and 1601FQ for all other final withholding taxes) must be submitted and payment of the taxes withheld at source made not later than the last day of the month following the end of the calendar quarter in which the withholding was made.
The returns must be accompanied by a list of payees, showing the name, taxpayer identification number (TIN), amount of income paid per month and the aggregate amount for the quarter, and the total tax withheld.
Withholding agents must file a monthly remittance form (BIR Form No. 0619E and/or 0619F) by the 10th day of the following month, whether or not tax is withheld. For withholding agents using the efiling and payment (eFPS) facility, the due date is the 15th day of the following month.
For sales of shares of stocks not traded on a local stock exchange and sales of real property considered as capital assets, filing and payment of tax must be made within 30 days after the sale or disposition using BIR Form No. 1707 and 1706, respectively. For sales of real property considered as trading assets, the tax due must be remitted by the 10th day following the month of the transaction using BIR Form No. 1606.
The withholding agent is required to file annually with the relevant local tax office:
BIR Form No. 1604E - return of creditable taxes withheld and payments exempt from withholding, together with a list of payees, on or before 1 March of the following year; and
BIR Form 1604F – return of final income taxes withheld, together with a list of payees, on or before 31 January of the following year.
Withholding tax obligations of top withholding agents
Under RR 11-2018, the definition of top withholding agents subject to the expanded withholding tax regime has been extended. In addition to (a) taxpayers classified as large taxpayers under RR 1-98, (b) top 20,000 private corporations under RR 6-2009 and (c) top 5,000 individuals under RR 6-2009, medium sized taxpayers (defined under RMO 17-2017 as the top 500 non-individual taxpayers of the 12 revenue regions that satisfy the criteria for large taxpayers but have not been notified by the Commissioner of Internal Revenue) and those under the taxpayer account management program (TAMP) also are included.
Under the regime, agents are required to withhold tax at 1% or 2% from payments for both regular purchases of goods and services, respectively, and one-off purchases of at least PHP 10,000. The obligation to withhold commences from the first day of the month following that in which the agent was first included in the published list of top withholding agents. For the first two months of the quarter, the tax withheld must be remitted to the BIR by the 10th day of the following month (for manual filers) or the 15th (for eFPS filers). For the final month of the quarter, the deadline is the last day of the following month.
Sources:
https: //www2.deloitte.com/content/dam/Deloitte/ph/Documents/tax/ph-tax-in-a-dot-amendments-withholding-tax-regulations-train-law-21mar2018.pdf
https: //www.taxathand.com/article/9603/Philippines/2018/Amendments-to-withholding-tax-regulations-under-TRAIN-Act
If the individual’s service is not classified as professional, it shall be subject to what CWT rate?
2%
Explain the CWT on rentals.
There is a 5% (FIVE PERCENT) CWT on:
A. GROSS RENTALS OR LEASE FOR THE CONTINUED USE OF POSSESSION OF PERSONAL PROPERTY in EXCESS OF 10,000 ANNUALLY
B. REAL PROPERTY USED IN BUSINESS WHICH THE PAYOR OR OBLIGOR HAS NOT TAKEN TITLE ON WHICH HE HAS NO EQUITY; POLES, BILLBOARDS, TRANSMISSION FACILITIES.
What are the types of withholding taxes?
- Withholding tax on compensation
- Expanded withholding tax
- Final withholding tax
- Withholding tax on government money payments
What are the responsibilities of withholding agents?
- To withhold the correct amount of tax
- To remit on time the taxes withheld
- To issue the corresponding certificates of taxes withheld
- To do year end adjustments
- To timely file with the BIR the annual information return and alphabetical lists of employees/payees
Explain the CWT on Rentals.
There is CWT on rentals of:
- Real properties - 5% CWT
- Poles, satellites, transmission facilities - 5% CWT
- Billboards - 5% CWT
- Cinematographic film rentals - 5% CWT
Explain the CWT on income payments by the government.
Any purchase of any national or local government agency is subject to CWT as follows:
Supplier of Goods - 1% CWT
Supplier of Services - 2% CWT
What form is used in payment of CWT and when is it paid?
FORM 0619E is used in paying MONTHLY REMITTANCE OF CWT of the FIRST TWO MONTHS OF THE QUARTER TO BE REMITTED ON OR BEFORE THE 10TH DAY OF THE FOLLOWING MONTH.
1ST QUARTER
JANUARY CWT is paid on or before FEB 10
FEBRUARY CWT is paid on or before MAR 10
FORM 1601EQ is used in filing and paying the QUARTERLY CWT TO BE REMITTED ON OR BEFORE THE LAST DAY OF THE FOLLOWING MONTH
1ST QUARTER
MARCH CWT is paid on or before APRIL 30
What is the tax base when computing the CWT?
The tax base must be NET OF VAT
