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Let's Talk Tax

To withhold or not to withhold: That is the question

Congratulations! You are now on top! Welcome to the club!

When you receive positive and laudatory remarks, one normally feels excited over something you might have actually won. These days, however, it would seem that, for taxpayers, this line (how I imagine the Bureau of Internal Revenue [BIR] would announce your acceptance to the prestigious top withholding agents club) should be received with extreme caution.

On May 24, 2018, the BIR issued Revenue Memorandum Order (RMO) No. 26-2018, prescribing the guidelines in monitoring, identifying, including, and deleting the Top Withholding Agents pursuant to the pertinent provisions of Revenue Regulations (RR) No. 11-2018. With the issuance of RR No. 11-2018 amending RR Nos. 2-1998, 17-2003, and 6-2009, taxpayers mandated to withhold the expanded withholding tax from their income payments to regular suppliers at 1% on goods and 2% on services are now identified as top withholding agents. Consequently, there is a need to update and revise the list of top withholding agents mandated by these recent regulations to withhold on their transactions with suppliers. The focus is on who or which of the lucky taxpayers will now be burdened with such a glorious purpose. With great power comes great responsibility, as the saying goes, and the chosen ones ought to adapt to their new circumstances.

Under RR 11-18, the Top Withholding Agents (TWAs) now include the following:

a. Existing top taxpayers who or that were classified and duly notified by the BIR Commissioner as any of the following, unless previously declassified or terminated business operations: i. A large taxpayer under RR No. 1-1998, as amended; ii. Top 20,000 private corporations under RR No. 6-2009; or iii. Top 5,000 individual taxpayers under RR No. 6-2009; and

b. Taxpayers newly identified and included as Medium Taxpayers, and those under the Taxpayer Account Management Program (TAMP).

RMO No. 26-2018 clarifies that existing large taxpayers, top 20,000 private corporations, and top 5,000 individual taxpayers, although already withholding the required 1% on purchase of goods and 2% on purchase of services, shall still be included in the initial publication of TWAs, in addition to the taxpayers identified as Medium Taxpayers and those under TAMP, if they are not yet previously classified as either top 20,000 private corporations or top 5,000 individual taxpayers.

A list of taxpayers recommended for inclusion as TWAs and/or for deletion, if any, is submitted by the concerned Revenue District Offices (RDOs), through their Regional Directors on a semestral basis, not later than every April 30 and Oct. 31 of each calendar year. These lists are later consolidated and evaluated every May 31 and Nov. 31 of each calendar year, for subsequent approval by the BIR Commissioner. The BIR Commissioner-approved list of TWAs and the regular semestral lists of TWAs for inclusion or deletion should be published in a newspaper of general circulation not later than every June 15 and Dec. 15 of each calendar year with the complete names of taxpayers and RDOs/LTS Divisions where they are duly registered, as well as in the posting of the same on the BIR website and issuance of a Revenue Memorandum Circular (RMC).

This publication is deemed sufficient notice to the concerned TWAs pursuant to the provisions of RR No. 11-2018, but the concerned RDOs may personally serve individual written notices of inclusion/deletion to the concerned TWAs under their respective jurisdictions. Whatever the circumstances of the taxpayer may be, it is certainly reassuring that this kind of service is being encouraged as a manner of allowing the taxpayers to be appropriately apprised of their ensuing obligation.

What needs attention and courtesy here is the ability of the BIR to successfully consider and promote the welfare of TWAs who are pretty much their extensions. The chosen ones are obliged to withhold on behalf of the government and, as such, should be granted adequate leeway in serving such a purpose. These agents can only function when given the consideration they deserve in complying with this regulation.

For instance, the rule imposed by RR No. 11-18 that requires the current withholding agents to start withholding on purchases of goods at 1%, even on a single purchase made which would involve P10,000 or more, shall now be subject to withholding tax. This is provided without necessarily defining the coverage on which this assignment can practically be applied. If an employee of a top withholding agent-corporation is tasked to acquire certain goods from a store and, upon reimbursing the said purchase, the employee could not have automatically withheld on the said transaction considering the circumstances. Consequently, this regulation warrants careful scrutiny and must be revisited to ensure realistic application to everyday transactions of TWAs, including employees.

Without the penalties and all other impractical requirements that add cargo to their hefty load, withholding agents can help ensure the government that it gets results in terms of its collection goals. At least 42.1% of the BIR’s 2016 tax collections came in the form of withholding taxes. Corporations that withhold account for at least 19.2% of the BIR’s collections while withholding on wages covers at least 17.9%. These figures definitely mean liquidity. If anything, the withholding agents should be afforded leniency and ample time to carry out their mandates as much as they promote the law’s promise of easier compliance. They should be furnished with information that is properly disseminated and protocols that dispense clarity since they play indispensable roles in sustaining the government’s tax collection. A special seminar on these new responsibilities should not hurt these TWAs. The key really is to strengthen the foundation to guarantee solid support.

Start marking your calendars. By the end of this month, you might have been selected to join the ranks of the top withholding agents. Stay alert. We ought to respectfully maintain the status quo while striving to assert our rights as we take part in the government’s journey towards economic freedom.

Now that you are on top of the list, wear your label proudly, but cautiously. Your membership in the top withholding agents’ list definitely indicates that you are one of the taxpayers capable of contributing to the country’s growth in more ways than one.


Steffanieh Gail M. Tan is an associate of the Tax Advisory and Compliance 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 26 June 2018