NEW PRICE THRESHOLD FOR THE SALE OF HOUSE AND LOT AND OTHER RESIDENTIAL DWELLINGS FOR VAT-EXEMPT PURPOSES IS P3,600,000 RR NO. 1-2024, JANUARY15, 2024
INCOME PAYMENTS MADE BY JV TO SUPPLIERS ARE SUBJECT TO WITHHOLDING TAX (1%/2%); SHARE OF CO-VENTURE FROM JV NOT TAXABLE AS CORPORATION IS SUBJECT TO 15% WITHHOLDING TAX RR No. 14-2023, November10, 2023
The BIR further amends the pertinent provisions of RR No. 2-98, as amended, to impose creditable withholding tax on certain income payments by joint ventures/consortiums.
| Income payments made by JV, whether incorporated or not, taxable or non-taxable, to their local/resident supplier of goods and services | Supplier of goods – 1%
Supplier of services – 2% |
| Distributive share of co-venturers/members from the net income of the joint venture/consortium not taxable as a corporation | On the share of each co-venturer/member from the net income from the joint venture/consortium not taxable as corporation prior to actual or constructive distribution thereof – 15% |
THE BIR IMPOSES 1% WITHHOLDING TAX ON ½ GROSS REMITTANCE BY E-MARKETPLACE OPERATORS AND DIGITAL FINANCIAL SERVICE PROVIDERS TO ONLINE SELLERS/MERCHANTS FOR ANNUAL GROSS REMITTANCES EXCEEDING P500,000.00. RR No. 16-2023, December21, 2023
- The BIR further amends the provisions of Revenue Regulations No. 2-98, as amended, to impose withholding tax on gross remittances made by electronic marketplace operators and digital financial services providers to sellers/merchants.
- The BIR imposes withholding tax on gross remittances by e-marketplace operators and digital financial services providers to online sellers/merchants for goods and services sold/paid through the former’s platform/facility.
- ½ of the gross remittance – 1%
- Not applicable when:
- Annual total gross remittances to online seller/merchant for the past taxable year has not exceeded P500,000.00; or
- If the cumulative gross remittances to an online seller/merchant in a taxable year has not exceeded P500,000.00; or
- If the seller/merchant is duly exempt from or subject to a lower income tax rate pursuant to an existing law or treaty (certification/clearance/ruling required)
- Gross remittance refers to the total amount received by the operator/financial services provider. Excludes:
- Sales returns and discounts;
- Consideration for the use of the platform.
- Electronic marketplace covers:
- Marketplace for online shopping;
- Food delivery platform;
- Platform for booking of resort, hotel, motel etc. located in the Philippines;
- Other similar online service or product marketplaces.
- E-market operators and digital services providers shall also withhold taxes on payment to transportation contractors for the carriage of goods and merchandise and commission on the goods and services.
- Effective date – January 11, 2024
- Transitory period – 90 days for e-marketplace operators and DFSP to comply.
- P500,000 – consists of the total amount of remittances received from ALL e-marketplace operators and DFSPs; if gross remittances exceeded P500,000 anytime during the year, withholding tax shall be automatically deducted from the particular remittance exceeding the threshold and the same shall be imposed on subsequent remittances.
- Obligations of seller/merchants:
- Register with the BIR and submit COR to the e-market operator prior to the use of e-market facility;
- Submit sworn declaration (SD) duly received by the BIR if gross remittance is expected not to exceed P500,000 threshold (to be submitted on or before 20th day of the first month of each taxable year; if exceeded, SD in a prescribed form shall be immediately submitted.
- Failure to submit prescribed SD: withholding tax shall be automatically deducted.
- If seller/merchant is exempt from income tax or subject to a lower income tax rate, submit a certification as proof of exemption or entitlement to a lower tax rate.
- All existing unregistered sellers/merchants are required to register; otherwise, they shall not be allowed to sell goods and services in the platform/facility.
- Sellers/merchants are not allowed to receive payments through their personal/individual accounts instead of business account; account must be under BIR-registered tradename.
THE PRESIDENT VETOED EXEMPTION OF MICRO-ENTERPRISE FROM OBLIGATION TO WITHHOLD TAXES.
RMC No. 3-2024, January 10, 2024 The BIR circularizes RA No. 11976 (Ease of Paying Taxes Act) and the Veto Message of President Ferdinand R. Marcos Jr
INCOME OF NON-RESIDENT FOREIGN CORPORATION IS SUBJECT TO FINAL WITHHOLDING TAX. RMC No. 5-2024, January10, 2024
- The BIR further clarifies the proper tax treatment of cross-border services in light of the Supreme Court En Banc Decision in Aces Philippines Cellular Satellite Corp. v. Commissioner of Internal Revenue, GR. No. 22668 (Aces).
- In Aces case, the Supreme Court subjected to final withholding tax the satellite airtime fee payments made by Aces Philippines (payor/withholding agent) to Aces Bermuda (payee/income earner), a non-resident foreign corporation (NRFC)
- The following are existing cross-border services akin to that of Aces case:
- International Service Provision (or cross-border services, including: consulting services, IT sourcing, financial services, telecommunications, engineering and construction, education and training, tourism and hospitality, and other similar services)
- Re. consulting services – the payment to the foreign consulting firm is considered an inflow of economic benefits to the foreign company. The income is sourced within the Philippines.
- International Service Provision (or cross-border services, including: consulting services, IT sourcing, financial services, telecommunications, engineering and construction, education and training, tourism and hospitality, and other similar services)
- Situs of taxation for the cross-border services: within the Philippines.
- Treatment of reimbursable or allocable expenses, especially for cross-border services between or among related parties:
- The reduction of expenses for a foreign corporation can be considered as income because it represents a financial gain or savings for the company. Thus foreign corporation’s net come or profit increased. Reduction in expenses is viewed as a form of income for foreign corporations.
- Effect if no benefits was derived from the cross-border transactions:
- If a Philippine company did not benefit, the payment is considered unnecessary for regular commercial activity and instead, it becomes a means of shifting profits to a foreign company. IT is an attempt to evade taxes or manipulate profits by funneling them to a foreign entity.
- Revenues generated from service fees paid to foreign companies or individuals, which are considered sources within the Philippines is subject to VAT.
- Our comments on RMC No. 5-2024: Invalid for being an unauthorized administrative legislation; for running counter to the rules of income under Section 42 of the Tax Code; for disregarding tax treaties; for being inconsistent with Section 108 (A), where payment for services rendered outside the Philippines are not subject to VAT.
