Tax Alert No. 4 [BIR Revenue Memorandum Circular No. 143-2019 dated 27 December 2019]

Clarifications on the lnclusion of Taxpayers as Top Withholding Agents Who Are Obliged to Remit the 1% and 2% Creditable Withholding Taxes Pursuant to the Criteria of Revenue Regulations No. 7-2019

The Commissioner of Internal Revenue has issued Revenue Memorandum Circular (RMC) No. 143-2019 dated 27 December 2019 to clarify the inclusion of taxpayers as Top Withholding Agents (TWAs) who are obliged to remit the 1% and 2% creditable withholding taxes (CWTs) pursuant to the criteria of Revenue Regulations (RR) No. 7-2019, and to circularize Operations Memorandum (OM) Order No. 20-2019.

The following taxpayers cannot be compelled to withhold 1% and 2% CWTs:

1. Those included or not deleted in the existing list of TWAs but do not satisfy the criteria of RR 7-2019; or
2. Those that may have satisfied the criteria but are among the taxpayers enumerated in OM No. 20-2019 who should be excluded from the list of TWAs, such as:
   • National government agencies, government-owned or controlled corporations, state universities and colleges and local government units;
   • Taxpayers who were included because of one-time transactions (i.e., estate and donor’s tax);
   • 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 (BIR Form No. 1701Q) 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
   • 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.).

You may access the full version of the RMC through the BIR website.