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04
July

Accounting for Withholding Taxes in the Philippines

By: Floyd C. Paguio

We had been browsing some search terms leading to our pages, blog posts and articles when we noticed the search phrase “accounting for withholding tax entries“, and this invites our attention to make a simple article on the accounting entries related to withholding taxes.  To start with, please note that under the tax rules,

“obligation to withhold arise upon your payment, accrual, or recording in the books of an expense subject to withholding taxes, whichever comes earlier”

 As such, we show you the sample related accounting entries in the books of the payor-withholding agent and that of the payee. To illustrate:

Let us assume that Company A secured the professional services of Mr. Juan de la Cruz amounting to P100,000, exclusive of 12% VAT, or a total of P112,000.00. What are the related accounting entries, assuming Mr. Juan de la Cruz’ income does not exceed P720,000.00 and the withholding tax rate is 10%?

I. Payment of expense subject to withholding

Upon payment, you may take the sample journal entry on the books of Company A as payor:

  • Debit: Professional fees (expense) – P100,000.00
  • Debit: Input VAT – P12,000.00
  • Credit: Cash – P102,000.00
  • Credit: Withholding tax payable – P10,000

As payee, it is at this point that you will recognize the expense and decrease cash by the amount paid, net of withholding tax. Withholding tax is bound to be remitted within the next month, so you record it as a liability in the meantime. You please note also that withholding tax is based on amount excluding VAT so computation is 10% of P100,000.00 or P10,000.00.

Upon remittance of Company A to BIR using BIR Form No. 1601E with Monthly Alphalist of Payee, the sample entry would be:

  • Debit: Withholding tax payable – P10,000
  • Credit: Cash – P10,000.00

On the books of payee Mr. A, you may take the sample journal entry below:

  • Debit: Cash – P102,000.00
  • Debit: Creditable Withholding Tax – P10,000
  • Credit: Professional fees (revenue)- P100,000.00
  • Credit: Output VAT – P12,000.00
In support of the above entry, Mr. A will issue a VAT official receipt for the cash of P102,000, and will receive a creditable withholding tax certificate (CWT or BIR Form No. 2307) either every payment of on a quarterly basis.  Upon application of Mr. A of the CWT against his quarterly or annual income tax liability based on BIR Form No. 2307 from Company A, you may have the sample journal entry as follows:
  • Debit: Income tax due and payable – P10,000
  • Credit: Creditable Withholding Tax – P10,000
II. Accrual of expense subject to withholding

If Company A did not pay at the end of the period, and simply recognize the expense, you may take the sample entry as follows :

  • Debit: Professional fees (expense) – P100,000.00
  • Debit: Deferred Input VAT – P12,000.00
  • Credit: Accrued expenses payable – P102,000.00
  • Credit: Withholding tax payable – P10,000
On the above, you recognize liability on accounts payable and withholding taxes. Input VAT is deferred and you cannot use against output VAT of Company A because you do not have a VAT official receipt in support. BIR will disallow the same and will penalize you if you claim input VAT on purchase of services without VAT official receipt.
Same entry with the above will be made upon remittance of the withholding taxes to the Bureau of Internal Revenue (BIR)
On the books of Mr. A, you may record the income accrual based on the following sample entry:
  • Debit: Accounts receivable – P102,000.00
  • Debit: Deferred Creditable Withholding Tax – P10,000
  • Credit: Professional fees (revenue)- P100,000.00
  • Credit: Deferred Output VAT – P12,000.00

You could not use deferred creditable withholding tax against quarterly or annual income tax liability of Mr. A without the BIR Form No. 2307 from Company A, and you cannot make Mr. A liable for VAT on the deferred output VAT because as service provider, his tax liability is based on gross receipts or collections.

III. Payment of accrued expense subject to withholding

Upon payment of accrued expenses subject to withholding taxes, you may adopt the sample entries on the books of Company A:

  • Debit: Accounts Payable – P102,000.00
  • Credit: Cash
  • Debit: Input VAT – P12,000.00
  • Credit: Deferred Input VAT – P12,000.00

You may likewise adopt the following sample entry upon collection of Mr. A of the recorded accrued revenue:

  • Debit: Cash – P102,000.00
  • Credit: Accounts receivable – P102,000.00
  • Debit: Creditable Withholding Tax – P10,000
  • Credit: Deferred Creditable Withholding Tax – P10,000
  • Debit: Deferred Output VAT – P12,000.00
  • Credit: Output VAT – P12,000.00

You please note that the deferred accounts are simply reversed to neutralize their temporary effect on the books.

The above are sample illustrative entries only, and you are free to make enhancements. Account titles may vary depending on the chart of accounts adopted by your company.


(Mr. Floyd C. Paguio is a Resource Speaker with Tax and Accounting Center, Inc. He is a Certified Public Accountant and the Managing Partner of GPP & Co., CPAs, an accounting firm engaged in the practice of accountancy catering clients from various industries. He is a professor of accounting at Polytechnic University of the Philippines – Taguig Campus and at the MAPUA I.T. Yuchechengco School of Business and Management. For comments, you may please send mail at floyd.paguio@gppcocpas.com)

Disclaimer: This article is for general conceptual guidance only and is neither an expert opinion, nor a substitute for an expert opinion in itself. Please consult your preferred accountant or accounting consultant for the specific details applicable to your circumstances.


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Comments

  1. maricor says:

    what is the difference between a professional fee from a pure compensation income? Am i correct to wit that while a compensation income is subject to withholding tax using the table 5-32%, a professional fee has only a certain withholding tax percentage? is it specifically called a “final tax”? is that 10%, the fix percentage applicable? Or is it dependent on the ceiling of 720k earned income? what if it will exceed such amount?

    Relevant to your post, why is there an input vat for the professional fee?

    will appreciate if the feedback would be very detailed.

  2. Hi Maricor, let us share views. Yes, compensation is subject to withholding tax of 5-32% and professional fees of 10%/15% based on the P720k level. Both of them are creditable withholding tax and not final tax, and as creditable, the payee will be given a withholding tax certificate (2316 for compensation and 2307 for professional fees) that they will deduct from their income tax liability. In final withholding tax, the amount withheld is the final payment of the tax so the payee does not pay further taxes. 10% withholding tax applies if the payee has an Affidavit received by the BIR stating that its gross income does not exceed P720k and in the absence of such affidavit or when it exceeds P720k, 15% withholding tax rate applies,

    Services of professional is a sale of service subject to 12% VAT subject to the VAT registration threshold of P1,919,500 starting 2012. Hope the above helps.

  3. maricor says:

    Thanks. Im still confused with regards to income tax filing particularly on the said Substituted filing? is it still needed to file for income tax return even if you know that your employer has withheld from you a correct withholding tax?

    1. TaxAcctgCenter says:

      Under substituted filing, an employee whose sole source of income is from employment is no longer required to file annual income tax return because its employer has already withheld and remitted BIR the correct amount of taxes. Under this instance, requiring them to file is impractical because no additional taxes will arise. Nevertheless, they, may opt to file income tax return if they would want to so you may take this option. For some institutions like banks and crdit card companies, I think they would prefer BIR filed ITR than Form 2316 from employer only.

  4. Elijah says:

    Hi Sir,

    If I received a rent billing for the current month. How can I accrue the input vat on rent and the EWT if I will pay the expense next month?

    Thanks,
    Elijah

  5. TaxAcctgCenter says:

    Rent is a service so a claim for input VAT should be supported by official receipt. This means that prior to payment, you cannot claim input VAT. As to withholding tax your accrual may be recorded as follows:
    Debit: Rent expense
    Credit: Accrued rent payable
    Credit: Withholding tax payable

    Upon payment of the tax, the following entry may apply:
    Debit: Withholding tax payable
    Credit: Cash

  6. emmjenn says:

    We are putting up business involving music tutorial… there are two sets of workers…1, employees/ staff or admin personnel and 2. instrument tutors/musicians. The employees/staff are under contract of employment while instrument tutors are under service contract since they have their own teaching techniques which is outside the control of the employer and most are teaching part time and based on their own schedule arrangements. What are the tax implications for this two set of employees. Am i correct that the staff/admin shall be subject to creditable withholding tax unless they are given minimum wage… How about the services of the musicians… how do i account for their income… will it be part of the cost of services? and what is the tax which can be withheld from their pay, if any? thanks

  7. TaxAcctgCenter says:

    Hi Emmjenn. The staff/admin are subject to withholding tax on compensation and not expanded withholding tax. The musicians seems to be not under the employ but an independent contractor so they appear to be subject to 10%/15% expanded withholding taxes and will issue an official receipt for the same. thanks

  8. emmjenn says:

    Thanks. I greatly appreciate you helping us with this matter. I hope it won’t take too much of your time if we are to ask a few more questions as we are having several questions making sure we won’t violate any rules.
    Do you mean the music teachers should have their respective receipt? What if they do not have any as they will be exclusively providing service to our business… they will be paid based on the number of pupils they would handle (similar to piece of work or hourly service).
    What should they need to furnish whether to determine if 10% or 15% should apply (we’ve read an article stating that an Affidavit should be executed by them indicating that they are earning less than 720k)?
    One more issue sir/maam… would it be possible for a sole proprietor to give himself salary being the head of the staffs… it would seem absurd because to our understanding sole proprietorship is the owner itself, but assuming it is possible, what would be the accounting entry for this or will this just constitute a withdrawal of capital, just the same please give us the accounting entry. Thanks

  9. TaxAcctgCenter says:

    The taxability of music teachers would depend on the arrangement. If you do not take them as employees, then, you take them as independent professionals in which case they are subject to expanded withholding tax. Yes, the affidavit will apply for the rates.

    It would not make sense a sole proprietor employing himself in his sole prop. As such, I would not suggest. Yes, it would just simply partake of a withdrawal of capital.

  10. Elijah says:

    Hi Sir,

    Should web hosting/web maintenance support fee subject to EWT?
    Im not sure if I will witheld tax upon payment to our supplier.

    Please help.

  11. TaxAcctgCenter says:

    If you are a non-top twenty thousand corp, payment to a local web host/maintainance is not subject to withholding. I do not think thay are covered by primary contractors.

  12. karren palileo says:

    very well explained sir floyd..salamat po, it helped me :)

  13. RLB says:

    Hi,

    Just wondering the impact of EWT on PAS17. Current practice making an accrual for the difference of actual payment and the straight line method as required by PAS17. how will we record the EWT? if the amount billed by the supplier is not the amount we actually book for expense and EWT is based on expense. thanks

  14. TaxAcctgCenter says:

    Hi RLB, EWT is based on actual rental expense without PAS17 implications. You follow the lease contract payments or payable for EWT purposes.

  15. FE B. says:

    Hello Sir,
    Can i ask what is the accounting treatment if the creditable withholding tax at source (2307) filed by the payor was not equal to the appropriate w/tax of the payee? Because the amount paid by the payor is inclusive of VAT which result to over payment of WHT . For example,…the professional fee of the doctor X is P10,000 inclusive of VAT. Then, the health provider paid his EWT-10% of Professional fee with 2307 form in the amount of P1000 but P892.46 (P10,000/1.12 x 10%) should be the appropriate EWT (10% of Professional fee (net of VAT). What would be the correct amount to be credited as Creditable VAT W/held in VAT declaration (2550M or2550Q)? Is it the amount paid by the payor in the amount of P1000 or P892.46 the correct EWT?

  16. TaxAcctgCenter says:

    H Fe B. The amount that the payee could claim as CWT is to the extent that the payor withheld and remitted. In case of over-withholding, payor may opt to claim for refund or carry-over, if applicable. In your example, we go with the CWT of P892.46 for income tax purposes and not for VAT purposes. VAT portion on the P10k professional fee should be P1,071.42 (P10,000 divided by 112% times 12%).

  17. FE B. says:

    Thanks for your reply.., You mean that the amount to be credited or deducted as CWT in Schedule 6 of Monthly VAT declaration (2550M) should be the correct amount of P892.46 and not the tax withheld and remitted by the payor of P1,000 that reported in the 2307 form? Eventhough the tax credited is not tally with the amount of tax withheld reported in 2307, right po?

  18. TaxAcctgCenter says:

    Hi Ms. Fe, you do not claim a CWT in the VAT returns. You claim the same on the ITR.

  19. FE B. says:

    Really? What is the purpose of Schedule No. 6 (Tax W/held Claimed as Tax Credit) in BIR Form No. 2550M? How does it compute? Why it appear in the VAT Return as deduction from Net VAT Payable item?

  20. TaxAcctgCenter says:

    Schedule 6 is for creditable VAT and not the creditable withholding tax covered by Form 2307 in your example on professional fees of doctors.

  21. FE B. says:

    If that the case, why the 2307 should be attached to 2550M? What is creditable VAT? Where can we get it?

  22. FE B. says:

    If the doctor is also a VAT registered professional, he cannot deduct the CWT issued by payor to him in case he files his VAT Return, right? Only in 1701 or 1701Q wherein he can deduct it.

  23. myco says:

    Hello sir.
    I would like to ask on what would be our journal entry on the vat we paid to BIR (output vat exceeded the input vat). I know it would be as easy as VAT Payable (dr) and Cash (cr). But the problem is, our previous accountant didn’t have separate account titles for the input vat and output vat, what’s in the books right now is Net Input Vat (input less output). There was no problem on our previous vat returns because the input vat always exceeded the output vat. (no entries made except on initial recognition of vat). Right now we really want to separate the input from the output but the problem is, it’s already hard to trace the composition of the “Net Input VAT” since this practice has started years back. By the way, we also have deferred input vat on our purchases of capital goods exceeding 1 million.

    Sir, we are asking for your help on this matter. Thank you so much.

    1. TaxAcctgCenter says:

      Hi Myco, I would refer you to this article on Accounting for VAT – http://taxacctgcenter.org/accounting-for-value-added-tax-vat-in-the-philippines/. Let us also invite you to our seminar on Value Added Tax, In and Out.

  24. TaxAcctgCenter says:

    Yes Ms. Fe. Only on 1701 or 1701Q. Let us invite you to our seminar on Value Added Tax, In and Out as we uncover more VAT rules for better tax compliance and management.

  25. FE B. says:

    Alright…thank you very much. I will find my available time to attend to your seminar on VAT In and Out. Btw, how much is the seminar fee? Thanks again. God bless

  26. TaxAcctgCenter says:

    Our seminar in-charge will send you the details of the seminar Ms. Fe. Thanks

  27. cath says:

    Sir, I would like to ask, Our Company was a Psychological test provider. Recently we had a client who wanted to deduct 10% WTP to our one time transaction to them…Tama po ba na 10% professional fee…yung iba po kasi naming client 2% lang ang dinededuct.

    hope you could help me.

  28. TaxAcctgCenter says:

    Yes Cath. 10% or 15% applies to professional fees of individuals. 2% is for contractors under non-professional fee.

  29. LOTUS GIRL says:

    I’M CONFUSED BETWEEN CREDITABLE WITHOLDING AND EXPANDED WITHOLDING TAX?
    CAN YOU EXPLAIN FURTHER AND GIVE SOME EXAMPLE… THANKS..
    GODBLESS

  30. LOTUS GIRL says:

    EXPLAIN FURTHER CREDITABLE AND E-VAT
    … THANKS..
    GODBLESS

  31. Romeo says:

    Is there witholding tax on December? I’m really wondering cos I’ve been working to a certain call center and this year is the first time I’ve got a witholding tax.

  32. TaxAcctgCenter says:

    @ Lotus Girl…creditable withholding tax and expanded withholding tax are just the same (e.g. 5% withholding tax on rental). The former creditable withholding of VAT has became final withholding VAT on government money payments.

  33. TaxAcctgCenter says:

    @Romeo.. Withholding tax is applied in all the months throughout the year. You might have been booked as a minimum wage earner last year so no withholding and your salary might have increased this year so they applied withholding tax on compensation. You can confirm this with your payroll officer. Thanks,

  34. Rina says:

    Hi.. Good Day! Just want to ask something.. Is it required for a company to claim an input tax and deduct EWT at the same time? Is it possible that the company claim an input tax but do not withheld an EWT even if the company is one of the top twenty thousand corp.? Thanx! God bless!

  35. TaxAcctgCenter says:

    Hi Rina. Input VAT and EWT are separate rules and one may apply without the other. No relationship within the two so you may claim input without regard to EWT and you may withhold without regard to input VAT. However, VAT is excluded in the tax base for EWT application.

  36. VIVIAN says:

    I made an error ont eh computation of the final tax and made an overpayment , what shall I do with it?

  37. jenny says:

    what is the ruling number that all the single proprietor is subjected to 15% expanded withholding tax?

  38. Sandra says:

    In the above example, how would the EWT AND VAT appear in, the OR ISSUED by mr. A ?

  39. jes says:

    Hi.I am doing an alphalist of 9 employees. Only 1 employee has been deducted a monthly withholding tax who is given 15K monthly salary less phic hdmf sss contri of 987.50 , so monthly net salary is 14012.50. I just want to ask if the employees who are earning 5K a month less phic hdmf sss ,so net salary is 4833.80 be included in the alphalist. His annual salary net of phic hdmf sss is 57999.60 and his personal exemption is 50K only. This employeee has not been deducted any withholding tax in his monthly payroll. but per annual computation 57999.60 less personal exemption of 50,000 would result to net taxable compensation income of 7999.90 so if you multiply it to 5& there is still due & payable of 3999.98

  40. jes says:

    it’s jes again basic salary of 57999.60 (net of phic hdmf sss) less personal exemption of 50,000 equals net taxable income of 7999.90 multiplied by 5% equals tax due of 399.98. should this employee be included in alphalist. he has not been deducted any w/tax for the year 2012.

  41. jalena says:

    what would be the entries (in relation to withholding tax) if a nonvat registered purchases services/goods to vat registered. I assume the wtax is based on net of vat, but there would be difference between the expense recognized by nonvat and the income recognized by the vat registered.

  42. Lhay says:

    i want to know how to record the tax withheld from the revenue incurred but the payment not yet receive in the fiscal year. the payment received first quarter of the prior year how will i classify it. kindly help me.. thanks

  43. Anne says:

    Hi Sir,
    For Tax Purposes, if I render a professional service to a corporation, what are those necessary things that I should know? For the corporation and as individual, please let me know also those entries and the form to be filled up and submit.

    Thank you very much and God bless.

  44. James says:

    Good Day Sir,
    In relation to MARICOR’S query

    my question is how to deal with the reports for BIR pusposes on Professional Fee?
    i mean, is the procedure same with compensaton tax?

    basically my question is on step by step reporting for taxes on professional fees?

    Thank You Very Much..

  45. Blossom says:

    Hello! Should the amount reflected in BIR Form 2307 be net of VAT? or gross? Thank you so much!

  46. Chard says:

    Hi, I have a question. Let’s say Person A moved to work from Company A to Company B within the taxable year June to December. Then unknowingly, your salary is being deducted for BIR tax but no deductions for Philhealth/SSS/HDMF, then you found out that Company B was actually still not registered under SEC, hence no BIR registration either (so probably they were deducting but not yet remitting to BIR), then on the next taxable year they finally got SEC registration and are now processing BIR registration way past Jan 31 of that year.

    What is wrong here? Can Company B still pay for all taxes of the employees to BIR for the previous year (note: they were not registered the previous year) and also pay for SSS/HDMF/Philhealth for the previous year? And up to what date can they still pay for the precious year , April 15 of current year?

  47. lra says:

    Hi Sir, please help me coz im confused regarding how to fill up the 2307 form after paying our retainer’s fee for the services rendered for the month of January 2013 only this Feb 2013, the date of check is Feb. 28, 2013 and the check is still with us, maybe they will collect it on March 2, 2013. my question is what period will i put on the period indicated at the above portion of the 2307 form and for what month will i put indicated at the middle portion of the form. tnx.

  48. Sai says:

    Hi Sir, I would like to ask if our company should withheld on the cellphone billing payments (telephone expense) even if the billing statement is not under the company name? sample, cellphone line of employee A(under employee name) to be paid by the company as a benefit. thanks

    1. Lei says:

      What if instead of a service, you purchased a furniture and it is not yet delivered to your company but you have made a downpayment for the goods; Is the payment should be recorded with the EWT equal to 1% of the downpayment? let’s say that 20,000 is the amount of downpayment from total bill of 100,000. Current entry is Debit: Advances to Supplier 20000 Credit: Cash 20000

  49. Meck says:

    Hi. A US-based company engaged my services a few years ago on a contractual basis. I was doing consultancy for their business in the States. The company is not registered in the Philippines and thus not recognized as a business entity in the country. They wire my fee to my bank account. I assume that this fee is net of applicable US taxes. Was I supposed to file an ITR? Appreciate your response. Thanks.

  50. FRANCES says:

    hello.
    would like to ask if for example, a professional gives a fee to a client which is VAT exclusive, does it mean he also doesnt need to pay withholding tax for this particular service?

  51. marilou says:

    Hi.
    Can we use the unused CWT Forms of last year in the current year? Pls. help.

  52. TaxAcctgCenter says:

    @Marilou. Yes, an excess CWT on prior year’s ITR are tax credits in the current year ITR.

  53. TaxAcctgCenter says:

    @Frances. VAT and withholding are two different taxes and absence of one does not mean inapplication of the other. Non-VAtable sales could also be subject to withholding tax.

  54. TaxAcctgCenter says:

    @Meck. Service is taxable in the place rendered, as such, it seems you are taxable in the Philippines (unless you fall on the exemptions under the tax treaty) and thus, the need to file ITR.

  55. Rachelle says:

    Hi. Just want to know if a law office’s acceptance fee subject to withholding tax? Thank you. :)

  56. Rizza D. says:

    Hi, How many years can a tax credit be carry over? The tax credit is due to tax withheld. Thanks

  57. Rizza D. says:

    *carried over. The tax credit is due to tax withheld of prior years. Its the 4th year of business.

  58. bernadette says:

    Hi! Just want to know what is the journal entry for tax refund of withholding tax on compensation? Tyvm and more power.

  59. Mitch says:

    HI! Just would like to ask regarding the basis of witholding tax. one of supplier is claiming that since they have issued a billing statement (Printed in their letterhead) this should not be subjected to witholding tax because the source or doucment submitted to us where only in their letterhead or billing statement only. Is their claim valid or not? is their any bir ruling that supports his claim?
    Thank you!

  60. abby says:

    what is the entry for a salary paid to a minimum wage earners?

  61. angel says:

    Referring to tax rule “obligation to withhold arise upon your payment, accrual, or recording in the books of an expense subject to withholding taxes whichever comes earlier” I believe if I interpret it correctly, the recording of withholding tax must be done in a transactional basis, meaning every payment, accrual or recording of expense which ever comes first. In a domestic purchase of goods situation, would you know the rational behind the recording in the books in a per transaction basis? I was just wondering, what is the difference between accumulating the amount of transactions subjected to withholding tax ( that is per invoiced amount – total) multiplied by 1% ( since the company belong to top 20,000 and its a purchase of goods) then posting the lump sum amount in month end rather calculating per transaction the amount that should be withheld. OR is the tax rule just a general rule not limiting the idea to only a per transaction basis but to require each corporation to withhold whenever such transaction (payment, accrual, expense) occur in a monthly basis?

  62. Sebastian James Harani says:

    Why not consult the professionals to settle your taxes? Just give them a call.

  63. cory says:

    Hi Sir, in hospitality industry we have our room rate of Php3,800.00/night inclusive of 12% VAT and 5% Service Charge. What will be the basis of computaion for witholding tax? We treat the Service Charge as Liability account distributable to the employees.

  64. Gracia says:

    Hi Sir.

    May I ask for the proper treatment if “professional fees” was not accrued last year because it was only paid this year.

    The withholding tax relating to it was only paid this year. Now, the company billed us for the unissued withholding tax saying that we should pay it because they reflected their revenue last year. In our books, I didn’t reflect the said expense last year because it was not probable that the billed amount will be paid last year.

    Thank you!

  65. zen says:

    hi!
    how much would Mr. A fill in in his VAT OR? Would it be the total amount due or net of the withholding? (Please include a sample if you may).
    thanks.

  66. Ruth says:

    Hi just want know if there is BIR ruling on partial payment of a sales invoice that will deduct expanded withholding tax?
    thanks,

  67. Thess says:

    hi….i am computing 2550M the total amount that supposedly was P548,450.00, less: Withholding Tax 5%, EWT 2% and City tax 9,597.88.
    I issued OR the amount of 504,573.99 only….this should be my sales????? and which I will declare to my 2550M? the 5% or 2%.

    thanks

  68. ivy says:

    hi sir, i would like to inquire remedy for overpaid final tax? the supplier reported correct amount of final tax not the final tax we erroneously paid to BIR. could the overpaid final tax be applied to other taxes payable to bir like expanded witholding tax or income tax? i really would appreciate feedback. i called bir officer of the day several times but they have different opinions.thank you

  69. chu says:

    Hi Sir,

    You have mentioned that the 5% withholding VAT is now a final Withholding (before creditable). May I know the specific ruling/regulation/circular for the change….

    Thanks in advance

  70. Iyel Rafanan says:

    Dear Sir ,

    Sir I would like to ask up to when we can claim CWT? Is there a period where we should use the CWT?

    And Sir, is the CWT for Management and technical consultants applies also to “Corp.”
    Is the Corp rendering Management and technical consultancy subject to the CWT of 10%/15% ? or the 2% for primary/sub contractors?

    My appreciation of any feedback sir..
    thanks po

  71. Maureen says:

    What is the VAT and EWT treatment if you are the third person? you only pay but not your expense because it is collectible.

  72. Chix says:

    Based on your example above regarding accrual. If the accrual happens in Dec 201A, and the collection of it is on May 201B. Can I avail the creditable withholding tax in my Dec 201A income tax return?

    1. TaxAcctgCenter says:

      @Chix. You avail CWT based on the certificates issued and agents normally issues this upon payment. Thanks.

  73. Amy Reyes says:

    Hi Sir,

    Hope you can enlighten me with creditable withholding tax. The case is related to uncollected tax credits related to 2012 Sales Invoices (sale of goods and services). Should we ba able to collect BIR Form 2307 dated 2013, can we use these as tax credits for 2013? What shall be the available recourse for those remaining uncollected? I believe, based on read BIR regulations, tax credit can only be used on the year the related income was declared or earned.

    Hope to receive feedback. Thanks

    1. TaxAcctgCenter says:

      @Amy. Yes, tax credits are used on the year the related income is declared so the normal recourse is to amend them. We suggest you pursue the remaining to maximize their use, otherwise, its a loss. Moving forward, you can ask clients to furnish Certificates upon every check payment. Thanks.

      1. Amy Reyes says:

        Hi. It was really nice to hear feedback from you. I have additional question please in connection with your reply to me dated July 15. You said we can ask the clients to furnish us certificates upon check payments… does this mean we can simply include these certificates as tax credits for the year 2013 (regardless if related sale was declared in previous year) or we have to amend the 2012 ITR and include these 2013 dated BIR Form 2307 as tax credits? Many thanks and more power!

        1. TaxAcctgCenter says:

          @ Amy. Please use this simple rule – claim of tax credit is matched with the year of recording income, but must be supported by a CWT. In general, we believe amendment is more proper to your case.

  74. Hi, I would like to know what particular law/regulation/jurisprudence states that the “obligation to withhold arise upon payment, accrual or recording…whichever comes first?”

    1. TaxAcctgCenter says:

      @Martin. You may please refer to Revenue Regulations No. 2-98, as amended. Thanks.

  75. llecra says:

    Hi, just wanna ask if payment to bir for tax w/held on purchase with deferred input be done one-time or upon application of input tax? I mean should it also be divided into 60 months?

    1. TaxAcctgCenter says:

      @Ilecra. I suspect you are referring to input VAT on capital goods. Input VAT on capital goods is apportioned based on the lower between the useful life or 60 months (not always 60 months) and not one-time.

  76. Mia says:

    Hi for transfers of assets do we need to withheld?

    example: Parent Company paid the supplier and withheld. Then Parent Company transfers the asset to Subsidiary, Do the Subsidiary need to withheld when paying the Parent Company?

    Thanks.

    1. TaxAcctgCenter says:

      @Mia. Yes, the fact of parent-subsidiary does not exempt withholding so normal withholding tax rules apply, if any.

  77. Sakura says:

    I am a new lecturer in an IT academy. I believe that they will charge VAT Input tax from my professional fee. However, I don’t have a business of my own so how do I issue them with a VAT receipt? I don’t mind the Withholding tax but it’s the VAT that’s bothering me. Please advise as I don’t know what to do once I collect my fee. Thanks.

    1. TaxAcctgCenter says:

      @Sakura. If it is a private company, we believe they are not allowed to do withholding of VAT by the fact that you are not a VAT registered. Yes, there could be no issue on withholding tax. VAT is imposed by the seller of service and not by the buyer, except, for government entities who are mandated to withhold VAT or percentage tax, whichever is applicable. As a business person/professional, it could also mean registration as such and securing an official receipt for the purpose, and other tax compliance. Thanks.

  78. Lloyd says:

    Hi, I have a question regarding withholding tax on wages.
    1. When are we allowed to claim over-remittance as deduction to our monthly remittance and what provision/regulation to support this?
    2. Is it allowed to change the status of an employee from regular to consultant? Example, they changed the status in December so they adjusted the withholding tax of that employee from 32% to 15% EWT on consultants. Is there a ruling that will prohibit this change since it will result to over-remiitance on our part?

  79. TaxAcctgCenter says:

    @Lloyd. I am inclined to believe that over-remittance is a reduction from withholding tax liability of subsequent month under RR 2-98. There seems to be no prohibition depending on how you justify and avoid BIR doubt of a tax reduction scheme/, if not tax evasion. Notably, a consultant is required to register with BIR, file and pay taxes, maintain books of accounts, and submit other BIR reports.

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