Update on the inclusion of taxpayers as top withholding agents (TWAs)

(Revenue Memorandum Circular No. 143-2019)

This Tax Alert is issued to inform all concerned on the clarifications pertaining to the inclusion of taxpayers as top withholding agents (TWAs) who are required to withhold 1% and 2% on purchases of goods and services, respectively.

The following taxpayers shall be excluded from the list of TWAs:

  1. Taxpayers which are included in the lists of TWAs published last October 2018, March 2019 and December 2019 but who failed to satisfy the criteria set under RR No. 07-2019 (i.e., gross sales/ receipts, gross purchases, or claimed deductible itemized expenses amounted to Php12M during the preceding taxable year), and;
  2. Taxpayers which, despite having met the criteria, were excluded pursuant to OM No. 20-2019, as follows:

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

b. Taxpayers who were included as TWA 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 agent and real estate broker, subject to verification of their duly filed 2018 Quarterly Income Tax Returns in order to determine the regularity of their transactions. Accordingly, if the Php12M criteria has been satisfied only in one (1) taxable quarter, the taxpayer shall not be qualified as TWA; and

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

Their liability to withhold the 1% and 2% creditable withholding tax shall cease immediately.