Top withholding agents — In for the greater good

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May Anne Tolentino

Taxwise Or Otherwise

“Any change, even a change for the better, is always accompanied by drawbacks and discomforts.”

— Arnold Bennett

As a tax practitioner, I rely on the rule of thumb that “when in doubt – withhold.” These days, this may no longer be the case as almost all local purchases of goods and services are now subject to withholding tax.

In a recent development aimed to simplify tax collection and the withholding tax system, the Bureau of Internal Revenue (BIR) issued a letter notice to the public published on Oct. 8, pursuant to the provisions of Revenue Regulation (RR) No. 11-2018. For the guidance of the taxpaying public, the BIR identified the Top Withholding Agents (TWAs) under the jurisdictions of the Large Taxpayers Service (LTS) and Revenue Regions, by listing down all existing, additional, and delisted withholding agents from the current lists, effective Nov. 1.

Under Revenue Memorandum Order (RMO) 26-2018, TWAs shall include the following:

1. A Large Taxpayer under RR No. 1-1998, as amended by Sections 4.5, 5.1 and 5.2 under RR 17-2010;

2. Top twenty thousand (20,000) private corporations under RR No. 6-2009;

3. Top five thousand (5,000) individuals under RR No. 6-2009; or

4. Medium Taxpayers, and those under the Taxpayer Account Management Program (TAMP) pursuant to RMO No. 17-2017 and RR No. 10-2014, respectively.

Although the publication of the approved list in October will suffice as notice to the TWAs, the concerned Revenue District Offices (RDOs) may also prepare and personally serve individual written notices of inclusion to the TWAs under its jurisdiction, indicating the classification of the taxpayer.

However, in case a taxpayer had not received the formal notice or seen the publication of the list in October, the BIR posted on its website ( the list of TWAs, both individual and non-individual, as of Oct. 8.

Under RR No. 11-2018, a newly identified TWA is mandated to withhold the expanded withholding tax equivalent to 1% on purchase of goods and 2% on purchase of services from local/resident suppliers including non-resident aliens engaged in trade or business in the Philippines.

To clarify, the term “goods” pertains to tangible personal property; it excludes intangible personal property, as well as agricultural products which are defined under Section 2 of RR No. 2-1998. Further, the term “local resident suppliers of goods/services” pertains to a supplier from whom the TWA regularly purchases goods/services. Regular supplier means to whom the taxpayer has transacted at least six times, regardless of the amount per transaction. As a general rule, this term does not include a casual purchase of goods/services, i.e., purchase made from a non-regular supplier and oftentimes involving a single purchase. However, a single purchase which involves P10,000 or more shall be subject to withholding tax.

Another important thing that a TWA should consider is that the 1% and 2% withholding tax only applies to transactions other than those covered by other withholding tax rates under Section 2.57.2 of RR No. 2-1998, as amended. For example, lease payments for office space should still be subject to 5% withholding tax on rentals instead of the 2% withholding tax applicable to other services purchased from regular suppliers of TWAs. In contrast, payment for utilities which is not specifically subject to withholding tax under the regulations will be subject to 2% withholding tax as a regular purchase of services by a TWA.

The obligation to withhold the 1% and 2% withholding taxes on goods and services, respectively, shall commence on the first day of the month following the month of publication of the list. In this case, since the advisory and the list were published in October, it shall take effect starting Nov. 1. Withheld taxes shall be reported under BIR Form 0619-E and BIR Form 1601-EQ on a monthly and quarterly basis, respectively.

The TWA is also required to submit a list of regular suppliers of goods and/or services to the RDO having jurisdiction over its principal place of business on or before July 31 (for the first semester) and Jan. 31 (for the second semester) of each year, in CD format or through e-submission. The initial list, however, shall be submitted within 15 days from publication of the notice of inclusion as one of the TWAs. For those newly included in the list published on Oct. 8, the initial list must have been submitted on Oct. 23.

Apart from compliance with reportorial requirements, more importantly, the BIR relies on TWAs to ensure that there is efficient collection of taxes on a monthly basis to support the budgetary needs of the government, including funding for its ‘Build, Build, Build’ infrastructure projects.

Clearly, the new guidelines impose more responsibilities on those newly included TWAs to act as extension offices for pulling taxes together. The challenge is how to collect effectively and efficiently in support of the BIR’s revenue targets.

Although the new directive shifts the burden to TWAs, on the positive side, it provides them an opportunity to serve the greater good of society. After all, the policy change will redound to the public’s benefit, the inconvenience notwithstanding.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.


May Anne Tolentino is a manager at the Client Accounting Services group of Isla Lipana & Co., the Philippine member firm of the PwC network.

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