TRAIN: Changes in withholding tax rates and compliance

TRAIN: Changes in withholding tax rates and compliance

by Leandro Ben M Robediso

train changes in withholding tax rates and compliance

As we enter the second week of January, we are slowly beginningto see the changes in Philippine taxation due to the Tax Reform for Inclusion and Acceleration (TRAIN) Law. Two of th eamendments to the Tax Code that are tax compliance-related are the changes in the top rate for expanded withholding tax (EWT) and the filing deadline for the final withholding tax (FWT) and EWT returns.

Ceiling of EWT rates

The TRAIN Law provides that starting Jan. 1, 2019, the EWT rates will range from one percent to 15 percent. Prior to this, the top rate was at 32 percent. While the said change is not yet in effect, the Bureau of Internal Revenue (BIR), by virtue of Revenue Memorandum Circular (RMC) No. 01-2018 dated Jan. 4, has advised the reduction of the EWT rates for the following income payments to eight percent from 10 percent and/or 15 percent a.) Professional fees, talent fees, commissions, etc. for services rendered by individuals, b.) Income distribution to beneficiaries of estates and trusts, c.) Income payment to certain brokers and agents, d.) Income payments to partners of general professional partnerships, e.) Professional fees paid to medical practitioners and f.) Commision of independent and/or exclusive sales representatives, and marketing agents of companies.

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