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Let's Talk Tax

Are you a top withholding agent?

Atty. Eleanor L. Roque Atty. Eleanor L. Roque

On Sunday afternoon, I was surprised to read news of Taal Volcano erupting, spewing ash and causing the shutdown of our international airport. I was caught unaware. A search of my newsfeed showed no prior articles about Taal Volcano, so I was surprised to see graphic images from friends and family of the volcanic eruption suddenly flooding my social media. Perhaps I was more focused on the Iran-US situation or the Duke and Duchess of Sussex’s announcement that they are stepping back from their royal roles to have missed updates on Taal, if there were any.

I hope that residents near the volcano had more prior warning than I did. Receiving the proper information is indeed important if we are to be prepared for contingencies and emergencies. The same is true if we are expected to comply with various rules and regulations applicable to our businesses. Hence, issuances from the Bureau of Internal Revenue (BIR) clarifying rules and requirements are always welcome developments.

Such was the case when the BIR issued Revenue Memorandum Circular (RMC) No. 143-2019 in December. RMC No. 143-2019 clarified the rules on being in the top withholding agent (TWA) list.

Prior to RMC No. 143-2019, some taxpayers complained of being on the list despite their businesses being small. I assume that the BIR is now cleaning up the TWA list. Last week, a friend happily announced that she had finally been delisted as a TWA. She should not have been on the list in the first place, considering her small trading business. Unlike in school, where students aim to be on the list of top students, being on the list of top withholding agents is not something most entrepreneurs aspire to.

TWAs have the additional task of withholding 1% on suppliers of goods and 2% on suppliers of services. The general rate of 1 and 2% creditable withholding tax (CWT) applies to regular local or resident suppliers, unless the withholding tax regulations specifically identify the payment as subject to a higher rate of withholding tax.

Under Revenue Regulations (RR) No. 7-2019, TWAs are taxpayers with gross sales/receipts or gross purchases or claimed deductible itemized expenses, as the case may be, of P12 million during the preceding taxable year.

Prior to 2018, newly identified TWAs received a letter from the BIR, informing them that they have been identified as TWAs and of their additional responsibility of withholding on all their regular purchases of goods and services. In early 2018, the BIR did away with sending notification letters to taxpayers identified as TWAs. The list is instead published in a newspaper of general circulation or posted on the BIR website. Hence, taxpayers are advised to regularly check the BIR website to ensure whether they are on the list.

Once published or posted, the TWA is obligated to withhold beginning the first day of the month following the month of publication. Taxpayers classified as TWAs under prior regulations remain as such, unless delisted from the existing TWA list.

Probably as a response to the confusion on why some taxpayers with relatively small incomes are included in the TWA list, RMC No. 143-2019 was issued to clarify the rules on TWAs. It emphasized that the TWA’s obligation to withhold is mandated only for businesses with significant levels of revenue, as identified in RR No 7-2019. It also reiterated the rules in Operations Memorandum Order No. 20-2019, which excluded the following taxpayers from the TWA list:

(a) National government agencies, government-owned or -controlled corporations, state universities and colleges, and local government units;

(b) Taxpayers who were included because of one-time transactions (i.e., estate and donor’s tax);

(c) Individual taxpayers deriving income on commission basis such as, but not limited to, insurance agents and real estate brokers if the P12-million income criteria was satisfied only in one taxable quarter (subject to verification);

(d) Taxpayers who are tax exempt from payment of income taxes with no proprietary activities (i.e., foundations, non-stock non-profit and tax exempt educational, religious and charitable institutions, etc.).

RMC No. 143-2019 emphasized that, even if taxpayers were included in the list or not removed from the existing list, they cannot be compelled to withhold the 1 and 2% CWT if they do not satisfy the P12-million threshold or they are excluded by Operations Memorandum Order No. 20-2019.

The clarification is a welcome break for small businesses on the list. The obligation of withholding the CWT is burdensome and even confusing for some businesses. In some cases, the obligation is even impossible to comply with, particularly if the expense is advanced by employees who are not well-informed on withholding tax rules. In such situations, some taxpayers just suffer the risk of paying deficiency taxes for failure to withhold the correct CWT.

However, even with the clarification under RMC No. 143-2019, it is indeed laudable that the BIR is continually cleaning up the list of TWAs. Taxpayers should not be left to fend for themselves and argue that they should no longer be on the list when audited by the BIR. Small businesses should be supported by the government by making compliance requirements easy to follow and understand. After all, the small businesses of today can become large taxpayers and important partners in inclusive growth, especially if given the proper support and guidance by the government.

I hope that residents affected by the Taal Volcano eruption are safe and receiving proper assistance from the government and NGOs. News reports have the shown the rapid escalation of Taal’s activity.

Many say prayers move mountains. In this case, I hope our prayers can calm a volcano.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


Eleanor Lucas Roque is the Head of Tax Advisory & Compliance division and one of the partner of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.


As published in BusinessWorld, dated 14 January 2020