RMC 35-2006 clarifies the treatment of EWTs for the business of freight forwarders.

Consequently, please note the following –

1. For cross-border movement of goods

a. Forwarders are the duly constituted withholding agents. Thus, forwarders shall
withhold and remit the EWTs from its payments to third party service providers
since it is the party having control over the disbursements of funds;
b. Further, forwarders shall be responsible in preparing the corresponding
certificates of creditable taxes withheld;
c. Lastly, forwarders shall prepare a listing/summary of the shippers/clients
indicating therein the amounts charged as freight and accessorial charges (net of
commission) which shall be attached to the ETW return filed with the BIR.

Please note that all payments to third party service providers (actual freight, together
with accessorial charges, and the offshore origin/destination charges), must be
covered by official receipts issued by the international carrier and the foreign freight
forwarder or foreign agent, respectively, in the name of the Freight Forwarder plus
any acceptable proofs of payment and other documents.

Otherwise, any such payments claimed to have been made by the forwarders to the
said third-party service providers which are not covered by the acceptable proofs
and relevant documents, shall be treated as forming part of the gross receipts of the
forwarders subject to VAT and not allowed as a deduction for income tax purposes.

2. For local transactions

If the forwarder issues its VAT official receipt for the entire amount received:
a. The shipper who claims the expenses for income tax purposes shall be
responsible in withholding and remitting the EWTs.

If the forwarder books a portion of the amount received as advances or reimbursable

expenses because it is earmarked for payments to third-party service provider:
a. The forwarder shall withhold the EWTs due on the payments;
b. Consequently, the forwarder shall issue the corresponding certificate of tax
withheld in the name of (1) the third-party service provider as the payee, and (2)
the name of the shipper as the real payor of income payment with parenthetical
mention of the name of the forwarder as agent of the shipper;
c. The forwarder shall be responsible to instruct the third-party service providers to
issue official receipts directly in the name of the shippers of the forwarders;
d. In the demand for reimbursement by the forwarder to the shippers, the
forwarder shall demand the amount actually paid (net of EWT) and shall instruct
the shipper to remit the EWT to the BIR.

Please note that the reimbursement received by the forwarder is no longer

subject to EWT since no income is derived from collection of these advances.
Consequently, these reimbursements do not form part of the forwarder’s gross
receipts, and covered by non-VAT acknowledgement receipts.
 However, should the reimbursement redound to the benefit of the forwarder,
the said reimbursement must be subject to EWT to be withheld by the shippers.
Consequently, these reimbursements form part of the forwarder’s gross receipts
and must be covered by VAT official receipts.

Please be guided accordingly.

We hope you find the foregoing helpful. Should you have questions or clarifications,
please let us know.

Regards,