(Revenue Memorandum Circular No. 47-2023, issued on May 3, 2023)
This Tax Alert is issued to reiterate the proper timing of remittance of withholding taxes by National Government Agencies (NGAs) and instrumentalities, Local Government Units (LGUs), and Government Owned and Controlled Corporations (GOCCs).
Under Revenue Regulations (RR) No. 12-01, which amended Section 2.57.4 of RR No. 2-98, the responsibility to deduct and withhold tax arises at the time when an income payment is paid or becomes payable, or when the income payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor’s books, whichever comes first.
Moreover, the Commission on Audit has mandated the use of the accrual basis of accounting in the Government Accounting Manuals for NGAs and LGUs since 2002, in accordance with the Philippine Public Sector Accounting Standards aligned with the International Public Sector Accounting Standards.
Despite the above, the BIR noted that some NGAs, LGUs and GOCCs still adopt cash basis of accounting. These entities still continue the practice of deduction and subsequent remittance of corresponding withholding taxes from their expenditures when it was actually paid.
Thus, the BIR urges all NGAs, LGUs, GOCCs, and other government entities to strictly adhere to the correct timing for remitting withholding tax obligations, i.e., payment or accrual of expense whichever comes first, to avoid incurring penalties.
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