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Are you happy to withhold?

It has been said that “happy are those conscious of their spiritual need, since the Kingdom of the heavens belongs to them.”

As a tax practitioner, I can say: “happy are those conscious of their withholding obligations, because they know what to do and they will be saved from incurring penalties.” This is significant especially to companies or individuals that qualify as top withholding agents due to their added withholding obligations.

An air of melancholy generally surrounds finance or accounting departments when they are informed that their companies are considered among the top withholding agents. It generates the feeling of resistance. But this is understandable. Being classified as a top withholding agent entails a lot of added work.

On properly withholding the tax, note that income payments to local or resident suppliers of goods or services [other than those income payments whose nature are specifically identified in Section 2.57.2 of Revenue Regulations (RR) No. 2-98, as amended] made by any of the top withholding agents, as determined by the Commissioner of Internal Revenue, shall be subjected to the 1% rate for suppliers of goods, and 2% for suppliers of services.

In previous years, one would know that they are identified as a top withholding agent once they receive a letter notification from the Bureau of Internal Revenue (BIR). This is where the confusion sometimes arises. There have been instances when the notice was misplaced or did not reach the proper finance or tax people and, consequently, the said company did not know that it should have withheld on certain income payments.

In other cases, some of the finance people of top withholding agents who received a notification from the BIR may have left the company, and there may have been no smooth turnover of files. As such, the newly hired personnel could not have been informed about the withholding obligation.

For some taxpayers, the above resulted in significant tax exposures.

With the issuance of BIR Revenue Memorandum Circular (RMC) No. 86-2018, dated Sept. 26, the above confusion is expected to be resolved. RMC No. 86-2018 provides lists of withholding agents required to deduct and remit the 1% and 2% creditable withholding tax for purchase of goods and services under RR No. 11-2018. The list of withholding agents is further classified into: (1) list of existing withholding agents; (2) list of additional withholding agents; and (3) list of withholding agents for deletion from existing list. These lists, which have a search facility feature, are posted on the BIR website and can now be viewed by everyone.

For those included under list 1 (existing withholding agents) and list 2 (additional withholding agents), their obligation to deduct and remit the 1% and 2% creditable withholding tax from the suppliers of goods and services shall continue and commence, as the case may be, effective Nov. 1. As the lists are easily accessible on the BIR website, entities are no longer in limbo as to their withholding obligation. Whether such entities are originally included in list 1 (existing withholding agents) and failed to do the necessary compliance, or are newly included in list 2 (additional withholding agents), they can now act accordingly and have the right resources to comply with this obligation. Otherwise, they run the risk of violating existing tax rules and would expose taxpayer-agents to the following possible consequences: (1) Non-deductibility of a business expense for income tax computation for failure to withhold until after paying the withholding tax and related penalties; (2) Payment of a basic withholding tax that should have been withheld; (3) One-time surcharge of 25% or 50% for willful neglect or fraudulent filing; (4) Interest and compromise penalties; or worse, criminal prosecution and imprisonment for willful neglect or fraudulent filing of withholding tax returns.

The penalties above may seem onerous, but can be avoided with religious compliance with the current rules.

On the other hand, there is a group of taxpayers now leaping for joy, as they are freed from the bondage of or confirmed in their exclusion from the 1% and 2% creditable withholding tax responsibility. Those delisted will no longer be required to perform the additional withholding obligation starting Nov. 1. Be that as it may, there is no room for complacency as they remain withholding agents with respect to their other income payments, such as professional fees, payments to contractors, and rentals, among others.

It is highly recommended that taxpayers check the lists as posted by the BIR on

Whether you are an existing or additional withholding agent or have been deleted from the list, you can be happy with your withholding obligation when you remember the admonition of Romans 13:7 to “render to all their dues: to the one who calls for the tax, the tax; to the one who calls for the tribute, the tribute.”


Renato R. Balisacan, Jr. is a manager of the Tax Advisory and Compliance Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.


As published in BusinessWorld, dated 23 October 2018