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Tax Notes

Clarifications on the inclusion of taxpayers as Top Withholding Agents pursuant to the c.....

THE Commissioner of Internal Revenue has issued Revenue Memorandum Circular (RMC) 143-2019 on Dec. 27, 2019, clarifying the inclusion of taxpayers as Top Withholding Agents (TWAs) who are obliged to remit the one percent and two percent Creditable Withholding Taxes (CWTs) under the criteria of Revenue Regulations (RR) 7-2019.

In the said RMC, prior regulations requiring taxpayers to remit and withhold CWTs are mandatory only for taxpayers whose business operations have a significant level of economic impact.

In 2019, the Deputy Commissioner of the Bureau of Internal Revenue’s Operations Group issued Operations Memorandum (OM) Order 20-2019 to all regional directors and revenue district officers to implement RR 7-2019 in line with the Ease of Doing Business policy by ensuring that the list of TWAs reflects only taxpayers who are compliant with the prescribed criteria.

The OM Order does not consider the following taxpayers TWAs; thus, the following taxpayers cannot be compelled to withhold one percent and two percent CWTs, although they have satisfied the prescribed criteria under RR 7-2019:

1. National government agencies, government-owned or -controlled corporations, state universities and colleges and local government units;

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

3. Individual taxpayers deriving income on a commission basis such as, but not limited to, insurance agents and real estate brokers, subject to verification of their duly filed 2018 Quarterly Income Tax Returns (BIR Form 1701Q) to determine the regularity of their transactions. Accordingly, if the P12 million criteria has been satisfied only in one taxable quarter, the taxpayer shall not be qualified as a TWA; and

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

RMC 143-2019 further clarified that taxpayers who are included or not omitted from the existing list of TWAs, but do not satisfy the criteria under RR 7-2019 (i.e., TWA are those whose gross sales/receipts, gross purchases, or claimed deductible itemized expenses amounted to P12 million during the preceding taxable year) or have satisfied the same, but qualify as enumerated under OM Order 20-2019, they cannot also be compelled to withhold the one percent and two percent CWTs.

Please be guided accordingly.


P&A Grant Thornton

Certified Public Accountants


As published in SunStar Cebu, dated 21 January 2020