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BAR 2019
Taxation
Handout No. 002-C

TAXATION Withholding Tax [1]

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REMINDERS IN TAXATION
Withholding Tax
Concept
1. Withholding tax is a method
collecting income tax in advance from
the taxable income of the recipient of
income. Thus, if the income of the
recipient is exempt from income tax, no
withholding of tax is required to be
made by the payor of such income,
which is constituted as a withholding
agent (Mamalateo, Reviewer on Taxation).
2. In the operation of the withholding tax
system, the payee is the taxpayer, the
person on whom the tax is imposed,
while the payor, a separate entity, acts
no more than an agent of
government for the collection of the tax
in order to ensure its payment.
Obviously, the amount thereby used to
settle the tax liability is deemed sourced
from the proceeds constitutive of the tax
base. In an ad valorem tax, the tax paid or
withheld is not deducted from the tax
base, except when the law clearly spells
out in defining the tax base (Bank of
America v Commissioner, 234 SCRA 302).
3. The duty to withhold is different from
the duty to pay income tax. Indeed, the
revenue officers generally disallows the
expenses claimed as deductions from
gross income, if no withholding of tax as
required by law or the regulations was
withheld and remitted to the BIR within
the prescribed dates (Mamalateo,
Reviewer on Taxation, 2014 Ed., p. 336)
4. Sections 57 and 58 of the 1997 NIRC, as
implemented by Section 2.58.3(B) of
Revenue Regulations No. 2‐98, clearly
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provide that proof of remittance is the
responsibility of the withholding agent
and not of the taxpayer‐refund claimant.
It should be borne in mind by that payor
of
of withholding taxes are by themselves
constituted as withholding agents of the
BIR. The taxes they withheld are held in
trust for the government. In the event
that the withholding agents commit
fraud against the government by not
remitting the taxes so withheld, such act
should not prejudice respondent.
Respondent has no control over the
remittance of the taxes withheld from its
income by the withholding agent or
payor who is the agent of the petitioner.
The Certificate of Creditable Tax
Withheld issued by the withholding
the agents of the government is prima facie
proof of actual payment by respondent‐
payee to the government itself through
said agents. The Supreme Court stressed
that the pertinent provisions of law and
the established jurisprudence evidently
demonstrate that there is no need for the
claimant‐respondent to prove actual
remittance by the withholding agent to
the BIR (CIR v. Asian Transmission
Corporation, G.R. 179617, January 19,
2011).
5. The withholding [of tax at source] was
devised for three primary reasons: first,
to provide the taxpayer a convenient
manner to meet his probable income tax
liability; second, to ensure the collection
of income tax which can otherwise be
lost or substantially reduced through
failure to file the corresponding
returns[;] and third, to improve the
government’s cash flow. This results in
administrative savings, prompt and
efficient collection of taxes, prevention
of delinquencies and reduction of
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governmental effort to collect taxes
through more complicated means and
remedies. The application of the
withholdings system to interest on bank
deposits or yield from deposit
substitutes is essentially to maximize
and expedite the collection of income
taxes by requiring its payment at the
source. Hence, when there are 20 or
more lenders/investors in a transaction
for a specific bond issue, the seller is
required to withhold the 20% final
income tax on the imputed interest
income from the bonds. (Banco de Oro v.
Republic, G.R. 198756, 13 January 2015)
Withholding agent
The following persons are constituted as
withholding agents:
a. In general, any juridical person,
whether or not engaged in trade or
business;
b. An individual with respect to
payments made in connection with his
trade or business. However, insofar as
taxable sale, exchange or transfer of
real property is concerned, individual
buyers who are not engaged in trade
or business are also constituted as
withholding agents; and
c. All government offices, including
government‐owned or controlled
corporations, as well as provincial,
city or municipal governments and
barangays (Mamalateo, Reviewer on
Taxation, 2014 Ed., p. 343).
In case of doubt, a withholding agent may
always protect himself or herself by
withholding the tax due and return the
amount of the tax withheld should it be
finally determined that the income paid is
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not subject to withholding. (Banco de Oro v.
Republic, G.R. 198756, 13 January 2015)
Withholding of Final Tax on certain
incomes:
The following forms of income shall be
subject to the final withholding tax: (RR 2‐
98, Sec. 2.57.1, as amended by RR 11-2018)
a. Income payments to a citizen or to a
resident alien individual;
(1) Interest from any peso bank deposit,
and yield or any monetary benefit
from deposit substitutes and from
trust funds and similar
arrangements; royalties (except on
books, as well as other literary and
musical compositions), prizes
(except prizes amounting to Ten
thousand pesos [₱10,000] or less
which shall be subject to tax under
Subsection (A) of Section 24 of the
Tax Code, as amended); and other
winnings (except winnings from
Philippine Charity Sweepstakes and
lotto amounting to ₱10,000 or less
which shall be exempt) derived from
sources within the Philippines –
Twenty percent (20%)
(2) Royalties on books, as well as other
literary works and musical
compositions - Ten percent (10%)
(3) Interest income received by an
individual taxpayer from a
depository bank under the
Expanded Foreign Currency Deposit
system – Fifteen percent (15%)
(4) Interest income from long-term
deposit or investment in the form of
savings, common or individual trust
funds, deposit substitutes,
investment management accounts
and other investments evidenced by
certificates in such form prescribed
by the Bangko Sentral ng Pilipinas
which was pre-terminated by the
holder before the fifth (5th) year at
the rates herein prescribed to be
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deducted and withheld from the
proceeds thereof based on the length
of time that the instrument was held
by the taxpayer -
Holding Period Rate
4 yrs to less than 5 yrs 5%
3 yrs to less than 4 yrs 12%
Less than 3 yrs 20%
b. Income Payment to Non‐resident Aliens
(5) Cash and / or property dividends
actually or constructively received
from a domestic corporation, joint
stock company, insurance or mutual
fund companies and regional
operating headquarters of
multinational companies, or on the
share of an individual in the
distributable net income after tax of
a partnership (except general
professional partnership) of which
he is a partner, or on the share of an
individual in the net income after
tax of an association, a joint account
or a joint venture or consortium
taxable as a corporation of which he
is a member or co-venturer – Ten
percent (10%)
(6) Capital Gains presumed to have
been realized from the sale,
exchange or other disposition of real
property located in the Philippines,
classified as capital assets, including
pacto de retro sales and other forms
of conditional sales based on the
gross selling price or fair market
value as determined in accordance
with Sec. 6(E) of the Code,
whichever is higher - Six percent
(6%)
In case of gains from dispositions of
real property to the government or
any of its political subdivisions or
agencies or to government-owned or
controlled corporations, shall be
subject either under the
regular/normal income tax for
individual citizens and residents or
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under the final tax on capital gains
at 6%, at the option of the taxpayer.
(7) Capital Gains from Sale of Shares of
Stock Not Traded in the Stock
Exchange. – On the net capital gains
realized during the taxable year
from the sale, barter, exchange or
other disposition of shares of stock
in a domestic corporation – Fifteen
percent (15%)
Engaged in Trade or Business in the
Philippines;
(1) Cash and/or property dividend from
a domestic corporation or from a
joint stock company, or from an
insurance or mutual fund company
or from a regional operating
headquarter of a multinational
company, or on the share in
distributable net income after tax of
a partnership (except general
professional partnership of which
which he is a partner, or on the
share of an individual in the net
income after tax of an association, a
joint account or a joint venture or
consortium taxable as a corporation
of which he is a member or co-
venturer – Twenty percent (20%)
(2) Interest from any currency bank
deposit and yield or any other
monetary benefit from deposit
substitutes and from trust funds and
similar arrangements; royalties
(except on books, as well as other
literary works and musical
compositions); prizes (except prizes
amounting to Ten thousand pesos
[₱10,000] or less which shall be
subject to tax under Subsection (A)
of Section 24 of the Tax Code, as
amended); and other winnings
(except winnings from Philippine
Charity Sweepstakes and lotto) –
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Twenty percent (20%)
(3) Same as items a(2) on royalties, a(4)
on long-term deposit or investment ,
a(6) on capital gains from
disposition of real property and a(7)
on disposition of shares of stock not
traded in the stock exchange.
c. Income Derived from All Sources
Within the Philippines by a Non‐
resident Alien Individual Not Engaged
in Trade or Business Within the
Philippines;
(1) Gross amount of income derived
from all sources within the
Philippines such as interest, cash
and/or property dividends, rents,
salaries, wages, premiums,
annuities, compensation,
remuneration, emoluments, or other
fixed or determinable annual or
periodic or causal gains, profits and
income and capital gains – Twenty-
five percent (25%)
(2) Same as a(6) on capital gains from
disposition of real property and a(7)
on disposition of shares of stock not
traded in the stock exchange.
d. Income Payment to a Domestic
Corporation;
(1) Interest from any currency bank
deposit and yield or any other
monetary benefit from deposit
substitutes and from trust funds and
similar arrangements derived from
sources within the Philippines –
Twenty percent (20%)
e. Income Payment to a Resident Foreign
(2) Royalties royalties, derived from
sources within the Philippines –
Twenty percent (20%)
(3) Interest income from a depository
bank under the Expanded Foreign
Currency Deposit system – Fifteen
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percent (15%)
(4) Income derived by a depository
bank under the Expanded Foreign
Currency Deposit System from
foreign transactions with local
commercial banks including
branches of foreign banks that may
be authorized by the Bangko Sentral
ng Pilipinas to transact business
with Foreign Currency Deposit
System Units and other depository
banks under the expanded foreign
currency deposit system including
interest income from foreign
currency loans granted by such
depository bank under the said
expanded foreign currency deposit
system to residents – Ten percent
(10%)
(5) Capital Gains presumed to have
been realized from the sale,
exchange or other disposition of real
property located in the Philippines,
classified as capital assets, including
pacto de retro sales and other forms
of conditional sales based on the
gross selling price or fair market
value as determined in accordance
with Sec. 6(E) of the Code,
whichever is higher - Six percent
(6%)
(6) Capital Gains from Sale of Shares of
Stock Not Traded in the Stock
Exchange. – On the net capital gains
realized during the taxable year
from the sale, barter, exchange or
other disposition of shares of stock
in a domestic corporation – Fifteen
percent (15%)
Corporation;
(1) Income derived by Offshore Banking
Units authorized by the Bangko
Sentral ng Pilipinas from foreign
currency transactions with local
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commercial banks and branches of (6) Capital Gains from Sale of Shares of
foreign banks that may be Stock Not Traded in the Stock
authorized by the BSP to transact Exchange. – On the net capital gains
business with offshore banking units realized during the taxable year
and other OBUs including interest from the sale, barter, exchange or
income derived from foreign other disposition of shares of stock
currency loans granted to residents - in a domestic corporation –
– Ten percent (10%)
Not over PhP100,000 5%
(2) Any branch profit remittances to the
Amount in excess of 10%
head office abroad based on the total
PhP100,000
profits applied or earmarked for
remittances without any deduction f. Income Derived From all Sources
for the tax component (except those Within the Philippines by Non‐ Resident
registered with the PEZA) – Fifteen Foreign Corporation;
percent (15%)
(1) Gross income derived from all
(3) Interest from any currency bank sources within the Philippines such
deposit and yield or any other as interest, dividends, rents, salaries,
monetary benefit from deposit
premiums (except reinsurance
substitutes and from trust funds and
premiums), annuities,compensation,
similar arrangements – Twenty
emoluments, or other fixed or
percent (20%)
determinable annual, periodic or
(4) Interest income from a depository causal gains, profits and income and
bank under the Expanded Foreign capital gains (except capital gains
Currency Deposit system – Seven from disposition of shares of stock in
and one-half percent (7.5%) any domestic corporation) – Thirty
percent (30%)
(5) Income derived by a depository
bank under the Expanded Foreign (2) Gross income from all sources
Currency Deposit System from within the Philippines derived by
foreign transactions with local non-resident cinematographic film
commercial banks including owners, lessors or distributors –
branches of foreign banks that may Twenty-five percent (25%)
be authorized by the Bangko Sentral
ng Pilipinas to transact business (3) Gross rentals, lease and charter fees,
with Foreign Currency Deposit derived by non-resident owner or
System Units and other depository lessor of vessels from leases or
banks under the expanded foreign charters to Filipino citizens or
currency deposit system including corporations as approved by the
interest income from foreign Maritime Industry Authority – Four
currency loans granted by such and one-half percent (4.5%)
depository bank under the said
expanded foreign currency deposit (4) Gross rentals, charter and other fees
system to residents – Ten percent derived by non-resident lessor of
(10%) aircraft, machineries and other
equipment – Seven and one-half

TAXATION Withholding Tax [6]

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percent (7.5%)
NOTE: The income derived from the
(5) Interest on Foreign Loans contracted following are now subject to the regular
on or after August 1, 1986 – Twenty income tax rate under Sec. 24(A)(2)(a) of the
percent (20%) Tax Code:

(6) Dividends received from a domestic

a. Income Derived by Alien
corporation subject to the condition
Individuals Employed by Regional
that the country in which the non-
or Area Headquarters and Regional
resident foreign corporation is
Operating Headquarters of
domiciled shall allow a credit
Multinational Companies;
against the tax due from the non-
resident foreign corporation deemed b. Income Derived by Alien
to have been paid in the Philippines Individuals Employed by Offshore
equivalent to fifteen percent (15%) – Banking Units;
Fifteen percent (15%)
c. Income of Aliens Employed by
(7) Capital Gains from Sale of Shares of Foreign Petroleum Service
Stock Not Traded in the Stock Contractors and Subcontractors;
Exchange. – On the net capital gains
realized during the taxable year While R.A. 10963 provides that those presently
from the sale, barter, exchange or availing the preferential income tax rate of
other disposition of shares of stock fifteen percent (15%) shall continue to avail the
in a domestic corporation – same, the proviso was vetoed by the President
for being violative of the Equal Protection
Not over PhP100,000 5%
Clause under Section 1, Article III of the 1987
Amount in excess of 10% Constitution.
PhP100,000
Creditable withholding tax
g. Fringe Benefits Granted to the Employee
(Except Rank and File Employee) on the 1. Under the creditable withholding tax
grossed-up monetary value of fringe system, taxes withheld on certain
benefits granted to furnished – income payments are intended to equal
or at least approximate the tax due of
Employee is a citizen/resident 35% the payee on said income. The income
alien/non- resident alien engaged in recipient is still required to file quarterly
trade or business within the
and annual income tax return to report
Philippines
the income and/or to pay the difference
Employee is a non-resident alien not 25% between the tax withheld and the tax
engaged in trade or business within
due on the income. Taxes withheld on
the Philippines
income payments covered by the

h. Informerʹs Reward to Persons expanded withholding tax system and

Instrumental in the Discovery of compensation income are creditable
Violations of the National Internal from the ordinary income tax of an
Revenue Code and the Discovery and individual or a corporation (Mamalateo,
Seizure of Smuggled Goods. Reviewer on Taxation)

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2. There are three (3) types of Creditable and ,
Withholding taxes: e. The payor‐withholding agent is also a
resident of the Philippines (Mamalateo,
a. Expanded withholding tax on
Reviewer on Taxation).
certain income payments made by
private persons to resident
taxpayers; Withholding tax on compensation

b. Withholding tax on compensation 1. The withholding of tax on compensation

income for services done in the income is a method of collecting the
Philippines, and
income tax at source upon receipt of the
income. It applies to all employed
c. Withholding tax on money
payments of the government. individuals whether citizens or aliens,
deriving income from compensation for
3. The withholding of creditable services rendered in the Philippines. The
withholding tax shall not apply to employer is constituted as the
income payments made to the withholding agent (RR 2‐98, Sec.2.78)
following:

a. National government and its 2. For withholding taxes on compensation

instrumentalities, including income taxable under R.A. No. 8424,
provincial, city or municipal which were received from January 1,
governments and barangays, except 1998 to June 30, 2008, the withholding
government‐owned or controlled tax tables in Section 2.78, Revenue
corporations; and Regulations No. 2‐98 shall be applied.
However, the revised withholding tax
b. persons enjoying exemptions from tables prescribed in Revenue
payment of income tax pursuant to Regulations No. 10‐2008, which was
the provisions of any law, general or issued to implement the provisions of
special (Mamalateo, Reviewer on R.A. No. 9504, shall be applied for
Taxation. compensation income received from
July 6, 2008 and onward (Mamalateo,
Expanded withholding tax Philippine Income Tax).

An income is subject to the expanded

3. Beginning January 1, 2018 until
withholding tax if the following conditions
December 31, 2022, every employer
are present:
making compensation payments to their
a. An expense is paid or payable by the respective employees shall deduct and
taxpayer, which is income to the withhold a tax determined in
recipient thereof subject to income tax; accordance with the Revised
b. The income is fixed or determinable at Withholding Tax Table provided in
the time of payment; Revenue Memorandum Circular No.
c. The income is one of the income 105-2017. For compensation paid
payments listed in the regulations that starting January 1, 2023, the revised
is subject to withholding tax; withholding tax table prescribed in
d. The income recipient is a resident of Revenue Regulation No. 11-2018 shall
the Philippines liable to income tax; be applied.

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thereof, the return of the amount
Fringe benefit tax deducted and withheld upon any wage
shall be made by the officer or employee
1. Fringe Benefits Tax is a final having control of the payment of such
wage, or by any officer or employee
withholding tax imposed on the
duly designated for the purpose (Sec.
grossed‐up monetary value of fringe 82, NIRC).
benefit furnished, granted or paid by the
employer to the employee, except rank 2. Statements and returns
and file employees, whether such
employer is an individual, professional a. Taxes deducted and withheld under
partnership or corporation, regardless of Section 57 by withholding agents
whether the corporation is taxable or shall be covered by a return and
not, or the government and its paid to an authorized Treasurer of
instrumentalities. the city or municipality where the
withholding agent has his legal
residence or principal place of
2. Fringe benefit tax is payable by the
business, or where the withholding
employer which shall be taxed in the
agent is a corporation, where the
same manner as provided under Section
principal office is located. No return
57 (A) of the Tax Code (Sec. 33 [A],
shall be required in cases where the
NIRC). In other words, fringe benefit is
Commissioner otherwise permits the
subject to final withholding tax.
non‐filing of the return (Sec. 58[A],
NIRC).
Withholding of VAT
b. Under R.A. 10963, the return for
In general, VAT due on sales of goods and
both the final and creditable
services are not subject to withholding since
withholding taxes shall be filed and
the tax is not determinable at the time of
the payment made not later than the
sale. However, gross payments made by the
last day of the month following the
government office, national or local,
including barangays, or their attached close of the quarter during which the
agencies or bodies, and government-owned withholding was made.
or controlled corporations, to local sellers of
c. Prior to the amendment, the return for
goods and services would be subject to
final withholding tax shall be filed
withholding in the tax rate prescribed
and the payment made within
under Revenue Regulation 2‐ 98, as
amended by Revenue Regulation 11-2018. twenty‐five (25) days from the close
of each calendar quarter, while the
Filing of return and payment of taxes return for creditable withholding
withheld taxes shall be filed and the payment
made not later than the last day of
1. Return and payment in case of
the month following the close of the
government employees
quarter during which withholding
If the employer is the Government of was made. The Commissioner, with
the Philippines or any political the approval of the Secretary of
subdivision, agency or instrumentality

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Finance, may require
withholding agents to pay or deposit
the taxes deducted or withheld at
more frequent intervals
necessary to protect the interest of
the government (Ibid).
c. Every withholding agent is required
to furnish each recipient a written
statement showing the income or
other payments made by
withholding agent during
quarter or year, and the amount of
the tax deducted and withheld
therefrom, simultaneously
payment at the request of the payee,
but not late than the twentieth (20th)
day following the close of the
quarter in the case of corporate
payee, or not later than March 1 of
the following year in the case of
individual payee for creditable
withholding taxes. For
withholding taxes, the statement
should be given to the payee on or
before January 31 of the succeeding
year (Sec. 58 [B], NIRC).
Final withholding tax at source
Under the final withholding tax system, the
amount of income tax withheld by the
withholding agent is constituted as a full
and final payment of the income tax due
from the payee on said income. The liability
for payment of the tax rests primarily on the
payor as a withholding agent. Thus, in case
of the withholding agent’s failure to
withhold the tax or in case of under‐
withholding, the deficiency tax shall be
collected from him. The payee‐recipient of
income is not required to file an income tax
return for the particular income, nor is he
liable for the payment of the tax (Sec. 2.57,
Revenue Regulations 2‐98). The finality of the
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these withholding tax is limited only to the
payee’s income tax liability on the particular
income. It does not extend to the payee’s
other tax liability on said income, such as
when
when the said income is further subject to a
percentage tax such as gross receipts tax in
case of a bank (Mamalateo, Reviewer on
Taxation)
Reminders:
the 1. Payment is a mode of extinguishing
obligations (Art. 1231, Civil Code) and it
such
means not only the delivery of money
but also the performance, in any other
manner, of an obligation. A taxpayer,
upon resident or non-resident, does so not
really to deposit an amount to the
Commissioner of Internal Revenue, but,
in truth, to perform and extinguish his
tax obligation for the year concerned. In
other words, he is paying his tax
liabilities for that year. Consequently, a
taxpayer whose income is withheld at
source will be deemed to have paid his
tax liability when the same falls due at
final the end of the tax year. It is from this
latter date then, or when the tax liability
falls due, that the two-year prescriptive
period under Section 306 (now part of
Section 230) of the Revenue Code starts
to run with respect to payments effected
through the withholding tax system.
(Philippine Bank of Communications vs.
Commissioner of Internal Revenue, G.R.
No. 194065, June 20, 2016)
2. Under Sections 24(B)(1), 27(D)(1),and
28(A)(7) of the 1997 National Internal
Revenue Code, a final withholding tax
at the rate of 20% is imposed on interest
on any currency bank deposit and yield
or any other monetary benefit from
deposit substitutes and from trust funds
and similar arrangements. (Banco de Oro
v. Republic, G.R. 198756, 13 January 2015)
3. Debt instruments that do not qualify as
deposit substitutes under the Tax Code
are subject to the regular income tax.
The phrase "all income derived from
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whatever source" in Chapter VI,
Computation of Gross Income, Section
32(A) of the 1997 National Internal
Revenue Code discloses a legislative
policy to include all income not
expressly exempted as within the class
of taxable income under our laws. The
definition of gross income is broad
enough to include all passive incomes
subject to specific tax rates or final taxes.
Hence, interest income from deposit
substitutes are necessarily part of
taxable income. However, since these
passive incomes are already subject to
different rates and taxed finally at
source, they are no longer included in
the computation of gross income, which
determines taxable income. Stated
otherwise, if there were no withholding
tax system in place in this country, this
20 percent portion of the ‘passive’
income of [creditors/lenders] would
actually be paid to the
[creditors/lenders] and then remitted by
them to the government in payment of
their income tax. (Banco de Oro v.
Republic, G.R. 198756, 13 January 2015)
4. In claims for excess and unutilized
creditable withholding tax, the
submission of BIR Forms 2307 is to
prove the fact of withholding of the
excess creditable withholding tax being
claimed for refund. This is clear in the
provision of Section 58.3, RR 2-98, as
amended, and in various rulings of the
Court. In the words of Section 2.58.3, RR
2-98, "That the fact of withholding is
established by a copy of a statement
duly issued by the payor (withholding
agent) to the payee showing the amount
paid and the amount of tax withheld
therefrom. Hence, the probative value of
BIR Form 2307, which is basically a
statement showing the amount paid for
the subject transaction and the amount
of tax withheld therefrom, is to establish
only the fact of withholding of the
claimed creditable withholding tax.
There is nothing in BIR Form No. 2307
which would establish either utilization
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or non-utilization, as the case may be, of
the creditable withholding tax. (PNB v.
CIR, GR No. 206019, March 18, 2015)
Time to withhold tax
1. The obligation of the payor to deduct
and withhold the tax under Section 2.57
of these regulations arises at the time an
income is paid or payable, whichever
comes first, the term ʺpayableʺ refers to
the date the obligation become due,
demandable or legally enforceable (sec.
2.57.4, RR 2‐98)
2. In the case of Filipinas Synthetic Fiber
Corporation vs. Court of Appeals (316
SCRA 480), the issue on whether the
ability to withhold income tax at source
on income payments arose upon
remittance of the amounts due to the
foreign creditors or upon accrual
thereof. The Supreme Court concurred
with the Court of Appeals that there
was a definite liability, a clear and
imminent certainty that at the maturity
of the loan contracts, the foreign
corporation was going to earn income in
an ascertained amount, so much so that
the petitioner already deducted as
business expense the said amount as
interest due to the foreign corporation.
This is allowed under the law, the
petitioner, in this case, having adopted
the accrual method of accounting.
Under the accrual basis method, income
is reportable when all the events have
occurred that fix the taxpayer’s right to
receive the income, and the amount can
be determined with reasonable
accuracy. Thus, it is the right to receive
income, and not the actual receipt, that
determines when to include the amount
in gross income. The following are the
requisites of this method:
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 ”HOME OF THE NATION’S TOP BAR REVIEWERS”
a. The right to receive the amount agent constitutes as intended to equal or
must be valid, unconditional and full and final at least approximate
enforceable; payment of the the tax due of the
income tax due from payee on said
b. The amount must be reasonably the payee on said income.
susceptible of accurate estimate; and income.

The liability for Payee of income is

c. There must be a reasonable
payment of the tax required to report
expectation that the amount will be rests primarily on the income and/or
paid in due course. the payor as a pay the difference
withholding agent. between the tax
Consequences of failure to withhold withheld and the tax
due on the income.
The withholding agent who willfully fails to The payee also has
withhold such tax, or account for and remit the right to ask for a
such tax, or aids or abets in any manner to refund if the tax
evade any such tax or the payment thereof, withheld is more
shall become liable upon conviction to a
than the tax due.
penalty equal to the total amount of tax not
withheld, or not accounted for and remitted The payee is not The income recipient
(Sec. 51, NIRC). In addition, any income required to file an is still required to
payment which is otherwise deductible income tax return file an income tax
from the payor’s gross income will not be for the particular return, as prescribed
allowed as a deduction if it is shown that income. in Sec.51 and Sec. 52
the income tax required to be withheld is of the NIRC, as
not paid to the BIR (Sec. 2.58.5, Revenue amended (Chamber
Regulation No. 2‐98, as amended). of Real Estate and
Builder’s Association,
Nature of withholding agent’s liability Inc. vs. Sec. Romulo,
G.R. No. 160756,
The withholding agent is directly and March 9,
independently liable for the correct amount
of the tax that should be withheld from the 2010).
dividend remittance. He is subject to and
liable for deficiency assessments, surcharges
and penalties should the amount of the tax
~o0o~
withheld be finally found to be less than the
amount that should have been withheld
under the law (Commissioner vs. Procter and
Gamble Philippines Manufacturing
Corporation, 204 SCRA 377).

Final withholding Creditable

Tax Withholding Tax

The amount of Taxes withheld on

income withheld by certain income
the withholding payments are

TAXATION Withholding Tax [12]