Tax Alert No. 32 [Revenue Regulations No. 11-2018 dated 31 January 2018]

Amending Certain Provisions of Revenue Regulations No. 2-98, as Amended, to Implement Further Amendments Introduced by Republic Act No. 10963, Otherwise Known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, Relative to Withholding of Income Tax 

The Secretary of Finance has issued Revenue Regulations (RR) No. 11 - 2018 dated 31 January 2018 to amend certain provisions of RR No. 2 – 98 pursuant to the amendments introduced by the TRAIN on withholding of income tax. The amendments relate to the following, among others:

1. Changes in the final withholding tax rates on income payments to a citizen or to a resident alien, non-resident aliens engaged and not engaged in trade or business in the Philippines, and to domestic corporations;
2. Changes in the creditable withholding tax rates and gross income thresholds on professional fees, talent fees, etc. (including professional fees paid to medical practitioners) for services rendered by an individual payee;
3. Required submission by individual payees (whose gross sales/receipts in a taxable year do not exceed PHP3m) of a sworn declaration of gross sales/receipts to income payors/withholding agents;
4. Required execution by income payors/withholding agents of a sworn declaration stating the number of payees who have submitted sworn declarations in item (3) with the accompanying copies of their Certificate of Registration (COR);
5. Inclusion of identified top 5,000 individuals and taxpayers identified as Medium Taxpayers, and those under the Taxpayer Account Management Program (TAMP) within the coverage of “top withholding agents” who are required to withhold 1% and 2% withholding tax on income payments (other than those covered by other withholding tax rates) on supplies of goods and services, respectively;
6. Required execution of a sworn declaration by an individual seller-income earner/payee if his or her income is sourced from a lone income payor and the total income payment is less than PHP250,000;
7. Required execution by income payors/withholding agents of a sworn declaration stating the number of payees who shall not be subjected to withholding taxes and have duly submitted their sworn declarations in item (6) and copies of COR;
8. Changes in the manner and time of filing the withholding tax returns (i.e., BIR Form No. 1601EQ for creditable withholding tax, BIR Form No. 1602 for final tax on interest on bank deposit, BIR Form No. 1603 for final tax withheld on fringe benefits, BIR Form No. 1601FQ for all other final withholding taxes);
9. Requirement to file monthly remittance forms (i.e., BIR Form No. 0619E and/or 0619F);
10. Adjustment on the thresholds for certain de minimis benefits not subject to income tax as well as to withholding tax on compensation;
11. Increase in the amount of income tax-exempt 13th month pay and other benefits to PHP90,000.

Income recipient/payee subject to creditable withholding tax under Section 2 of the Regulations and those availing of withholding tax exemption shall submit on or before 6 April 2018 a duly accomplished “Income Payee’s Sworn Declaration of Gross Receipts/Sales”, together with a copy of the COR to his/her income payor/withholding agent. 

The income payor/withholding agent who/which received the said sworn declaration and the copy of the payee’s COR shall submit on or before 20 April 2018 a duly accomplished “Income Payor/Withholding Agent’s Sworn Declaration”, together with the list of payees who have submitted “Income Payee’s Sworn Declaration of Gross Receipts/Sales and copies of CORs. 

Income payor/withholding agent who has withheld excess income tax shall refund the same to the payee, with the former reflecting the amount refunded as adjustment to the remittable tax withheld due for the said quarter. 

RR No. 11 - 2018 is effective beginning 1 January 2018, the effectivity date of the TRAIN.