Tax Alert No. 12 [Revenue Regulations No. 1-2019 dated 27 December 2018]

13 Feb 2019

The Secretary of Finance has issued RR No. 1-2019 dated 27 December 2018 to further amend certain provisions of RR No. 2-98, as amended, particularly on the rates of creditable withholding tax (CWT) of certain income payments.

Section 57(B) of the National Internal Revenue Code of 1997, as amended by Section 17 of the TRAIN Law, provides that the CWT rate shall not be less than one percent (1%) but not more than fifteen percent (15%) [previously thirty two percent (32%)] of the income payment.

However, the CWT rates for certain income payments under Section 2.57.2 of RR No. 2-98 remained to be more than 15% notwithstanding the issuance of RR No. 11-2018.

Thus, RR No. 1-2019 hereby reduces the CWT rates for the following income payments:

Income payments subject to CWT under RR No. 20-98, amended by RR No. 1-2019	Old rates (RR No. 2 – 98 as amended by RR No. 11 – 2018)	New rates(RR No. 1-2019)
Section 2.57.2. (P)(1). Manila Electric Company (MERALCO) refund arising from Supreme Court Case G.R. No. 141314 dated 9 April 2003 payments to customers under Phase IV as approved by the Energy Regulatory Commission (ERC). On gross amount of refund given by MERALCO customers.	25% /32%	15%
Section 2.57.2. (P)(2)(ii). MERALCO payments to non-residential customers for the interest income on the refund of meter deposits determined, computed, and paid in accordance with the "Rules to Govern Refund of Meter Deposits to Residential and Non-Residential Customers", as approved by the ERC under Resolution No. 8, Series of 2008, dated 4 June 2008 implementing Article 8 of the Magna Carta for Residential Electricity Consumers and ERC Resolution No. 2005-10 RM (otherwise known as DSOAR) dated 18 January 2006, exempting all electricity consumers from the payment of meter deposit. On gross amount of interest paid directly to the non-residential customers or applied against said customers’ billings.	20%	15%
Section 2.57.2. (Q)(ii). Interest income on the refund paid to non-residential customers either through direct payment or application against customers' billings by other electric Distribution Utilities in accordance with the rules embodied in ERC Resolution No. 8, Series of 2008, dated 4 June 2008, governing the refund of meter deposits which was approved and adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for Residential Electricity Consumers and Article 3.4.2 of DSOAR, exempting all electricity consumers from the payment of meter deposit.	20%	15%
Section 2.57.2. (S). On interest income derived from any other debt instruments not within the coverage of ‘deposit substitutes’ and RR No. 14-2012, unless otherwise provided by law or regulations.	20%	15%