Mabel L. Buted
I have previously written in this column about the new processes, procedures, and requirements related to the claim for refund of excess and unutilized creditable withholding taxes, as modified by the Ease of Paying Taxes (“EOPT”) Act. Other than these, there are also other changes introduced under the EOPT involving the withholding of taxes that taxpayers must be aware of. One of these pertains to the rule on the timing of withholding of taxes.
Before the EOPT, the rule on the timing for the withholding of taxes was not specifically provided in the Tax Code itself. This was supplied by revenue regulations and other revenue issuances, specifically RR No. 02-98 and its predecessors. Under RR No. 02-98, the withholding agent must deduct and withhold the tax at the time an income payment is paid or payable, or the income payment is accrued or recorded as an expense or asset in the books, whichever comes first. Further, the term “payable” was defined in the revenue regulations as referring to the date the obligation becomes due, demandable, or legally enforceable.
917 Overhead Shot PointingThe EOPT introduced a new provision in the Tax Code that explicitly defines the rule on the timing of withholding of taxes on income payments. As modified, the tax law provides that the obligation to deduct and withhold the tax arises at the time the income has become payable. Implementing this is RR No. 4-2024, which interprets the term “payable” in the same way as RR No. 02-98 did. It is provided in RR No. 04-2024 that an income becomes payable when the obligation becomes due, demandable, or legally enforceable. However, as to the point in time for the withholding of the tax, the said RR requires the payor to withhold “at the time an income payment is accrued or recorded as an expense or asset, whichever is applicable, in the payor’s books, or upon the issuance by the seller of the sales invoice or other adequate document to support such payable, whichever comes first.”
It can be gleaned that RR No.4-2024 deleted the phrase “at the time an income payment is paid or payable” and replaced it with another event, that is, at the time of the issuance by the seller of the sales invoice or other adequate document to support such payable.
The withholding tax rule as implemented by RR 4-2024 leaves me thinking about many questions regarding the supposed change made under the EOPT and how it is being implemented. What is the difference between the withholding tax rules before and after EOPT?
Please see link for the full story.
