Top, a word that I know many of us dream or aspire to be at. We always hear the saying “Always reach for the top” that we have learned to apply in our day-to-day living. As a student, we want to be at the top of our class. As an athlete, we want to be on top of our game. As a singer, we want to sing at the top of our lungs. As a mountain climber, we always want to reach the top. Most people find joy on being on top of everything they do. However, does being on top automatically entitles you to better things or opportunities? I guess that is what we need to find out.

Just a brief history, way back in 2001, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 6-2001 that introduced the Top 5,000 Private Corporations. Two years passed, RR No. 17-2003 was released to make it Top 10,000 Private Corporations. After five years, RR No. 14-2008 was issued which doubled the number to Top 20,000 Private Corporations. With the effectivity of Republic Act No. 10963 (TRAIN Law) and the issuance of RR No. 11-2018, the classification was changed to “Top Withholding Agents” (TWAs).

Last 13 June 2019, the BIR issued RR No. 7-2019 amending the requirements for TWAs. The significant change introduced by this RR is that the criteria to be classified as a TWA was narrowed down to only one. To be a TWA, a taxpayer shall have gross sales/receipts or gross purchases or claimed deductible itemized expenses amounting to Twelve Million Pesos (Php12,000,000.00) in the preceding taxable year.

So what happens if you are tagged by the BIR as one of the TWAs? Do you receive some sort of a reward (say, a tax incentive) for being one of the taxpayers who remitted the most number of withholding taxes?

Once tagged as a TWA, there is a need to withhold one percent (1%) expanded withholding tax (EWT) and two percent (2%) EWT from income payments made to local resident suppliers of goods and suppliers of services, respectively. They are also required to submit semestral list of regular suppliers. Lastly, they are required to register in the BIR’s Electronic Filing and Payment System (EFPS).

Compliance to these tasks are not as simple as it may seem. For example, there is still uncertainty and ambiguity on the definition of “regular suppliers”. Under the existing withholding tax regulations, regular suppliers are those engaged in business or exercise of profession/calling with whom the taxpayer-buyer has transacted at least six (6) transactions, regardless of the amount per transaction, either in the previous year or current year. Considering that TWAs have transactions that are recurring but have very minimal amounts (e.g., parking tickets, purchases to convenient stores, etc.), it seems impossible or rather impracticable to withhold taxes on such payments. When in doubt, TWAs would just resort to shoulder the applicable EWT to avoid issues of underwithholding in case of a tax audit.

Is being a TWA a good or bad thing for taxpayers? It may sound prestigious as you are tagged as among the biggest or largest taxpayers in the Philippines. In this aspect, the famous phrase “With great power comes great responsibility” might be applicable. With such recognition, a taxpayer is equally burdened to withhold and remit more taxes to the BIR and sometimes shoulder the taxes due to ambiguity in terms of tax compliance. This is because failure to comply with the obligations of TWAs entails penalties. So when in doubt, TWAs just withhold. Compliance could have been more bearable if a more clear rules or guidance from the tax authorities could be extended to TWAs, especially to those who are newly identified as such.

Life could be this ironic. Notwithstanding the inconvenience, TWAs or not have no choice but to follow and adhere to our tax laws.

_{Christine Gael C. Dy is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice and Tier 1 transfer pricing practice by the International Tax Review.}

_{This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.}

_{The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email ph-inquiry@kpmg.com or rgmanabat@kpmg.com.}