How to Compute Fringe Benefit Tax (FBT) in the Philippines

Employees are considered by many as the best assets in business organizations. They are the labor force that contributes to the productivity, as well as profitability and stability of any enterprise. Thus, making employees and workers motivated and happy is a necessity for every employer. Employers, whether individuals or corporations, give their employees benefits in the forms of basic salaries, bonuses and fringe benefits to compensate them for their hard work, promote their health and well-beings, maintain goodwill and or preserve their work efficiency. However, these benefits received by employees become their income, and when there is income, there may also be income tax to be remitted to the government. Generally, compensation income is subject to regular income tax or withholding tax on compensation. On the other hand, fringe benefits granted to employees (except rank and file employees), may be subjected to a final tax we called Fringe Benefit Tax. The following are guidelines, definitions, computation and other important information you need to know about Fringe Benefit Tax in the Philippines.

What is a fringe benefit tax?

Fringe benefit tax (FBT) is a final withholding tax on the grossed-up monetary value of the fringe benefit granted by the employer to an employee who holds a managerial or supervisory position (i.e., except rank and file employees). FBT is treated as a final income tax on the employee which shall be withheld and paid by the employer on a calendar quarterly basis.

What is a fringe benefit?

Fringe benefit means any good, service or other benefit furnished or granted by an employer in cash or in kind, in addition to basic salaries to employees (except rank and file employees) such as, but not limited to the following: 1. Housing; 2. Expense account; 3. Vehicle of any kind; 4. Household personnel, such as maid, driver and others; 5. Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted; 6. Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations; 7. Expenses for foreign travel; 8. Holiday and vacation expenses; 9. Educational assistance to the employee or his dependents 10. Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows.

What are the benefits not covered by Fringe Benefit Tax?

The following employee benefits are not covered by Fringe Benefit Tax: 1. Fringe benefits which are authorized and exempted from income tax under the Code or under special law. Separation benefits which are given to employees who are involuntarily separated from work are not subject to FBT. 2. Contributions of the employer for the benefit of the employee to retirement, insurance and hospitalization benefit plans; 3. Benefits given to the rank and file, whether granted under a collective bargaining agreement or not; 4. De minimis benefits

5. Benefits granted to employee as required by the nature of, or necessary to the trade, business or profession of the employer 6. Benefits granted for the convenience of the employer Although the benefit may be exempt from FBT, it may, however, still form part of the employees gross compensation income which is subject to income tax, which is required to be covered by the withholding tax on wages.

What are De Minimis benefits?

The term De Minimis benefits which are exempt from the fringe benefit tax shall, in general, be limited to facilities or privileges furnished or offered by an employer to his employees that are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency of his employees. The following are considered as de minimis benefits granted to each employee as updated by Revenue Regulation (RR) 5-2011: (a) Monetized unused vacation leave credits of private employees not exceeding 10 days during the year (b) Monetized value of vacation and sick leave credits paid to government officials and employees; (c) Medical cash allowance to dependents of employees not exceeding P750.00 per employee per semester or P125 per month; (d) Rice subsidy of P1,500.00 or one (1) sack of 50-kg rice per month amounting to not more than P1,500.00; (e) Uniforms and clothing allowance not exceeding P4,000 per annum; (f) Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 per annum; (g) Laundry allowance not exceeding P300 per month;

(h) Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000.00 received by the employee under an established written plan which does not discriminate in favor of highly paid employees; (i) Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum; and (j) Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the basic minimum wage on a per region basis. All other benefits given by employers which are not included in the above enumeration shall not be considered as de minimis benefits, and hence, shall be subject to fringe benefit tax.

How to compute the Fringe Benefit tax?

The final withholding tax on fringe benefit shall be computed based on the taxable grossed-up monetary value multiplied by the applicable tax rate. a. The grossed-up monetary value The grossed-up monetary value of the fringe benefit shall be determined by dividing the monetary value of the fringe benefit as provided for in Revenue Regulations No 3-98 (as amended by RR 52011) by the percentage divisor in accordance with the following schedule:

In general, for citizen, resident alien, and non-resident alien engaged in trade or business in the Philippines 68% For non-resident alien not engaged in trade or business in the Philippines 75%

For alien or Filipino individuals employed by Foreign Petroleum Service Contractors/ Subcontractors, Offshore Banking Units and Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies occupying executive/managerial and technical positions 85%

Note: Employees in special economic zones, including Clark Special Economic Zone and Subic Economic and Free Trade Zone, subject to the applicable divisor as herein provided. b. Applicable tax rates The fringe benefit tax shall be imposed at the following rates:

In general 32% For non-resident alien individual who is not engaged in trade or business in the Philippines 25% For alien or Filipino individuals employed by Foreign Petroleum Service Contractors/Subcontractors, Offshore Banking Units and Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies occupying executive/managerial and technical positions 15%

Note: Employees in special economic zones, including Clark Special Economic Zone and Subic Special Economic and Free Trade Zone, subject to the normal rate of fringe benefit tax or the special rates of 25% or 15% as herein provided. Sample computation of Fringe Benefit Tax Example/Question: VQA Company (a domestic employer/company) granted Mr. Santos (a Filipino branch manager employee), in addition to his basic salaries, Php 4,000 cash per quarter for his personal membership fees at Astro Gym (a fitness and athletic club). How much is the FBT that VQA Company should withhold and remit to BIR per quarter? Computation/Answer: Monetary value of fringe benefit: Php 4,000

Percentage divisor applicable: 68% Fringe benefit tax rate: 32% FBT= (Monetary value of fringe benefit/68%) x 32% FBT= (Php 4,000/68%) x 32% FBT= Php 5,882.35 x 32% FBT= Php 1,882.35

How to File Fringe Benefit Tax Return?

The following are information and guidelines you need to know in filing fringe benefit tax return with the Bureau of Internal Revenue (BIR). What is the BIR Form used to file Fringe Benefit Tax? BIR Form No. 1603 Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid to Employees Other than Rank and File. Please download BIR form 1603 here. Who Are Required To File? Every withholding agent/payor who is either an individual or nonindividual required to deduct and withhold taxes on fringe benefits furnished to employees other than rank and file employees subject to Final Withholding Tax What are the procedures in filing BIR Form 1603? 1. Read instructions indicated in the tax return. 2. Accomplish BIR Form 1603 in triplicate copies. 3. If there is tax required to be remitted:

Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments and your payment.

In places where there are no AAB, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments and your payment. Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer.

4. If there is no tax required to be remitted:

Proceed to the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1603, together with the required attachments. Receive your copy of the duly stamped and validated form from the RDO representative

Deadline Filing and Payment Via EFPS On or before the fifteenth (15th) day of the month following the end of the calendar quarter in which the fringe benefits were granted to the recipient. Manual Filing and Payment On or before the tenth (10th) day of the month following the end of the calendar quarter in which the fringe benefits were granted to the recipient. Reference and further codal readings: R.A. 8424 (as amended), BIR RR 2 and 3-98 (as amended), BIR RR 5-2011 (as amended), RMC 20-2011, BIR Form 1603 guidelines and tax rates, Bureau of Internal Revenue Philippines (www.bir.gov.ph)

MANILA, Philippines - The tax exemption on clothing allowance received by officials and employees in the government and private sectors has been increased from P4,000 to P5,000. The clothing, or uniform allowance is part of the so-called "De Minimis" benefits that are exempt from income tax on compensation as well as fringe benefit tax. Except for the clothing allowance, Revenue Commissioner Kim S. Jacinto-Henares did not change, or increase the ceilings for other De Minimis privileges when she issued recently Revenue Regulations No. 8-2012 which took effect starting this year. These small value benefits are given by employers to their personnel to promote goodwill, efficiency and contentment. Under Revenue Revenue Regulations No. 5-2011, the Bureau of Internal Revenue (BIR) listed certain De Minimis benefits as monetized unused vacation leave credits of employees in the private sector not exceeding 10 days per year and monetized value of vacation and sick leave credits paid to government personnel.

Expanded Withholding Tax in the Philippines

Feb 27, 2011 by Victorino Abrugar at Law & Government, Taxation

Expanded withholding tax on certain income payments and withholding tax on compensation are two of the common withholding taxes you should withheld and remit to the government, when applicable. In turn, the payees of these income payments can claim those taxes withheld as creditable against their income tax due for the corresponding quarters or year by attaching the applicable certificate of creditable tax withheld (BIR Form 2316 for taxes withheld on compensation and BIR Form 2307 for taxes withheld at source). In the following discussions, we shall tackle and aim to learn more about the expanded withholding tax in the Philippines.

What is expanded withholding tax?

Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter/year in which the particular income was earned.

What income payments are subject to Expanded Withholding Tax?

The following income payments are subject to Expanded Withholding Tax: 1. Professional fees / talent fees for services rendered by the following: a) Those individually engaged in the practice of profession or callings such as lawyers,certified public accountants, doctors of medicine, architecs, engineers and all other professionals who have undergone licensure examinations regulated by the Professional Regulations Commission, Supreme Court, etc. b) Professional entertainers such as but not limited to actors and actresses, singers, lyricist, composers and emcees c) Professional athletes including basketball players, pelotaris and jockeys d) Directors and producers involved in movies, stage, radio, television and musical productions e) Insurance agents and insurance adjusters f) Management and technical consultants g) Bookkeeping agents and agencies h) Other recipient of talent fees i) Fees of directors who are not employees of the company paying such fees whose duties are confined to attendance at and participation in the meetings of the Board of Directors 2. Professional fees, talent fees, etc for services of taxable juridical persons 3. Rentals: a) b) c) d) -Rental of real property used in business -Rental of personal properties in excess of P 10,000 annually -Rental of poles, satellites and transmission facilities -Rental of billboards

4. Cinematographic film rentals and other payments 5. Income payments to certain contractors a) b) c) General engineering contractors General building contractors Specialty contractors

d) Other contractors such as transportation contractors, janitorial, security, messengerial, advertising, labor recruiting agencies, computer programmers, etc. 6. Income distribution to the beneficiaries of estates and trusts 7. Gross commission or service fees of customs, insurance, stock, real estate, immigration and commercial brokers and fees of agents of professional entertainers 8. Income payments to partners of general professional partnerships 9. Payments made to medical practitioners 10. Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset 11. J. Additional income payments to government personnel from importers, shipping and airline companies or their agents 12. Certain income payments made by credit card companies 13) Income payments made by the top 20,000 private corporations to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding 14. Income payments by government offices on their purchase of goods and services, from local/resident suppliers other than those covered by other rates of withholding 15. Commission, rebates, discounts and other similar considerations paid/granted to independent and exclusive distributors, medical/technical and sales representatives and marketing agents and sub-agents of multi level marketing companies. 16. Tolling fees paid to refineries 17. Payments made by pre-need companies to funeral parlors 18. Payments made to embalmers by funeral parlors 19. Income payments made to suppliers of agricultural products (suspension not yet lifted) 20. Income payments on purchases of mineral, mineral products and quarry resources 21. On gross amount of refund given by MERALCO to customers with active contracts as classified by MERALCO; 22. Interest income on the refund paid through direct payment or application against customers billing by other eletrict Distribution Utilities in accordance with the rules embodied in ERC Resolution No. 8 series of 2008 dated June 4, 2008 governing the refund of meter deposits which was approved and adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for Residential Electricity Consumers and Article 3.4.2 of DSOAR exempting all electricity consumers, whether residential or non-residential from the payment of meter deposit.

23 Income payments made by the top 5,000 individual taxpayers to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding 24. Income payments made by political parties and candidates of local and national elections of all their campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates

Who are required to file the expanded withholding tax returns?

The following individuals and entities are required to file the BIR Form No. 1601-E Monthly Remittance Return of Income Taxes Withheld (Expanded) and BIR Form No. 1604-E -Annual Information Return of Creditable Income Taxes Withheld (Expanded): Every registered withholding agent on Expanded Withholding Tax, which may include, but not limited to the following: 1) Individual engaged in business or practice of profession 2) Non-individual (corporation, association, partnership) whether engaged in business or not. 3) Government agencies and instrumentalities (e.g., National Government Agencies, Government-Owned or Controlled Corporations, Local Government Units, etc.)

What are the procedures of filing the expanded withholding tax returns?
For the steps and procedures in computing and filing the expanded withholding tax payable and returns, please read our article titled How to Compute Expanded Withholding Tax in the Philippines.

How to Compute Expanded Withholding Tax in the Philippines

How to compute expanded withholding tax in the Philippines? How to file BIR Form 1601-E or the Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) return? This is the follow up post on our previous published article titled Expanded Withholding Tax in the Philippines, where weve discussed its definition, nature and the individuals or entities who are required to file the expanded withholding tax returns. As we tackled in our previous article, Expanded Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter or year in which the particular income was earned. If you are engaged in business, you need an office or commercial

space, but you dont own a land or building, you definitely resort into renting. Thus, you become a lessee and pay rental expense to your lessor. In this case, you become a withholding agent who shall withhold tax on the rental payment you pay to the lessor. Companies and businesses also often need to outsource services from professionals, such as Certified Public Accountants, lawyers, engineers, architects and software programmers. When this happens, they also need to withhold expanded withholding tax on the income payments they pay to those professionals through monthly filing of BIR Form 1601E and annual submission of BIR Form 1604E (Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes). In return, the professionals and the lessor above can claim the taxes withheld as creditable taxes which they can deduct against their income taxes due for the corresponding taxable quarter or year. They can do that by asking for BIR Form 2307 (Certificate of Creditable Tax Withheld at Source) from the withholding agent and attaching it to their income tax returns.

How to Compute Expanded Withholding Tax

The calculation of expanded withholding tax is simpler than the computation of withholding tax on compensation. Expanded withholding tax is computed using the fixed rates imposed on different natures of income payments as shown below: Expanded Withholding Tax Rates as shown on the back of BIR Form 1601E

Sample Computation of Expanded Withholding Tax

Lets assume Company A is paying a gross monthly rental of P20,000 to Mr. B for the office space rented by Company A. What is the monthly tax that should be withheld and remitted to the BIR by Company A? Answer: The nature of income payments paid by Company A belongs to rentals, which include real/personal properties, poles, satellites & transmission, facilities and billboards (please refer to the tax rate schedule above). This type of income payment has a tax rate of 5%. Hence, the computation of tax to be withheld is as follows: EWT= Income payments x tax rate EWT= P20,000 x 5% EWT=P1,000

Computation of expanded withholding tax is easy as you only refer to the tax rates table above. Now lets try for our own actual computation.

How to file BIR Form 1601-E

Below, are the requirements and procedures of filing the Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded). Documentary Requirements 1.Return previously filed and proof of remittance, if amended return 2. Monthly Alphalist of Payees (MAP) 3. For advance payment, BIR Form No. 0605 4. Tax Remittance Advice (for NGAs) Procedures 1. Read instructions indicated in the tax return. 2. Accomplish BIR Form No. 1601-E in triplicate copies. 3. If there is tax required to be remitted: a) Proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form No. 1601- E, together with the required attachments and your payment. b) In places where there are no AABs, proceed to the Revenue Collection Officer or duly Authorized City or Municipal Treasurer located within the Revenue District Office where you are registered or taxpayer concerned is registered and present the duly accomplished BIR Form 1601 E, together with the required attachments and your payment c) Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer/duly Authorized City or Municipal Treasurer. 4. If there is no tax required to be remitted: a) Proceed to the Revenue District Office where you are registered and present the duly accomplished BIR Form 1601 E, together with the required attachments. b) Receive your copy of the duly stamped and validated form from the RDO representative.

Deadline
Filing Via EFPS

Group A Fifteen (15) days following end of the month Group B Fourteen (14) days following end of the month Group C Thirteen (13) days following end of the month Group D Twelve (12) days following end of the month Group E Eleven (11) days following end of the month Note: The staggered manner of filing is only allowed to taxpayers using the Eletronic Filing and Payment System (EFPS). Please refer to RR No. 26-2002 for the groupings of taxpayers based on the industry classification. Payment Via EFPS On or before the fifteenth (15th) day of the month following the month withholding was made, except for taxes withheld for the month of December which shall be paid on or before January 20th of the succeeding year Manual Filing and Payment On or before the tenth (10th) day of the month following the month the withholding was made, except for taxes withheld for the month of December which shall be filed and paid on or before January 15 of the succeeding year 1) What are the types of Withholding Taxes? There are four types of withholding taxes, namely: a. Withholding Tax on Compensation b. Expanded Withholding Tax c. Final Withholding Tax d. Withholding Tax on Government Money Payments - Withholding Tax on Vat - Withholding Tax on Percentage Taxes 2) What is compensation? It means any remuneration received for services performed by an employee from his employer under an employee-employer relationship. 3) What are the different kinds of compensation? Regular compensation - includes basic salary, fixed allowances for representation, transportation and others paid to an employee Supplemental compensation - includes payments to an employee in addition to the regular compensation such as but not limited to the following: - Overtime Pay - Fees, including director's fees - Commission - Profit Sharing - Monetized Vacation and Sick Leave - Fringe benefits received by rank & file employees - Hazard Pay - Taxable 13th month pay and other benefits - Other remunerations received from an employee-employer relationship

4) What are exempted from Withholding Tax on Compensation? Remuneration as an incident of employment Retirement benefits received under RA 7641 Any amount received by an official or employee or by his heirs from the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee such as retrenchment, redundancy or cessation of business Social security benefits, retirement gratuities, pensions and other similar benefits Payment of benefits due or to become due to any person residing in the Philippines under the law of the US administered US Veterans Administration Payment of benefits made under the SSS Act of 1954, as amended Benefits received from the GSIS Act of 1937, as amended, and the retirement gratuity received by the government employee Remuneration paid for agricultural labor Remuneration for domestic services Remuneration for casual labor not in the course of an employer's trade or business Compensation for services by a citizen or resident of the Philippines for a foreign government or an international organization Payment for damages Proceeds of Life Insurance Amount received by the insured as a return of premium Compensation for injuries or sickness Income exempt under Treaty Thirteenth (13th) month pay and other benefits (not to exceed P 30,000) GSIS, SSS, Medicare and other contributions 5) Who are not subject to Withholding Tax on Compensation? Any employee whose total compensation income does not exceed the statutory minimum wage of Five Thousand (P 5,000.00) Pesos a month or Sixty Thousand (P 60,000.00) Pesos a year is not subject to Withholding Tax on Compensation. NOTE: Employee whose total annual compensation does not exceed P 60,000 shall be given two options with which to pay his income tax due as follows: His compensation income shall be subjected to withholding tax, but he shall not be required to file the income return prescribed in Section 51 of the Code (filing of an individual return) except when covered by any of the situations enumerated in Sec. 2.83.4 of Revenue Regulations No. 2-98, or His compensation income shall not be subject to withholding tax but he shall file his annual income tax return and pay the tax due thereon, annually. When the employee has opted to have his compensation income subjected to Withholding tax so as to be relieved of the obligation of filing an annual Income Tax return and paying his tax due on a lump sum basis, he shall execute a waiver in a prescribed BIR Form of his exemption(s) from withholding, which shall constitute the authority for the employers to apply the withholding tax table provided under Revenue Regulations No. 2-98. 6) What income payments are subject to Expanded Withholding Tax?

a) Professional fees / talent fees for services rendered by the following: Those individually engaged in the practice of profession or callings Professional entertainers such as but not limited to actors and actresses, singers and emcees Professional athletes including basketball players, pelotaris and jockeys Directors involved in movies, stage, radio, television and musical directors Insurance agents and insurance adjusters Management and technical consultants Bookkeeping agents and agencies Other recipient of talent fees Fees of directors who are not employees of the company paying such fees whose duties are confined to attendance art and participation in the meetings of the Board of Directors b) Professional fees, talent fees, etc for services of taxable judicial persons c) Rental of real property (in excess of P 10,000) used in business d) Rental of personal properties in excess of P 10,000 annually e) Rental of poles, satellites and transmission facilities f) Rental of billboards g) Cinematographic film rentals and other payments h) Income payments to certain contractors General engineering contractors General building contractors Specialty contractors Other contractors like: - Transportation contractors - Filling, demolition and salvage work contractors and operators of mine drilling apparatus - Operators of dockyards - Persons engaged in the installation of water system, and gas or electric light, hear or power - Operators of stevedoring, warehousing or forwarding establishments - Printers, bookbinders, lithographers and publishers, except those principally engaged in the publication or printing of any newspaper, magazine, review or bulletin which appears at regular intervals, with fixed prices for subscription and sale - Advertising agencies, exclusive of payments to media - Independent producers of television, radio and stage performances or shows - Independent producers of "jingles" - Labor recruiting agencies - Persons engaged in the installation of elevators, central air conditioning units, computer machines and other equipment and machineries and the maintenance services thereon - Messengerial, janitorial, security, private detective and other business agencies - Persons engaged in landscaping services - Persons engaged in the collection and disposal of garbage - TV and radio station operators on sale of TV and radio airtime, and - TV and radio blocktimers on sale of TV and radio commercial spots - Persons engaged in the sale of computer services, computer programmers, software developer/designer, etc. i) Income distribution to the beneficiaries of estates and trusts j) Gross commission or service fees of customs, insurance, stock, real estate, immigration and commercial brokers and fees of agents of professional entertainers k) Commission, rebates, discounts and other similar considerations paid/granted to independent and exclusive distributors, medical/technical and sales representatives and marketing agents and sub-agents of multi level marketing companies l) Income payments to partners of general professional partnerships

m) Payments made to medical practitioners through a duly registered professional partnership n) Payments for medical/dental/veterinary services thru hospitals/clinics/health maintenance organizations, including direct payments to service providers o) Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property p) Additional income payments to government personnel from importers, shipping and airline companies or their agents q) Certain income payments made by credit card companies r) Income payments made by the top 10,000 private corporations to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding s) Income payments by government offices on their purchase of goods and services, from local/resident suppliers t) Tolling fees paid to refineries u) Payments made by pre-need companies to funeral parlors v) Payments made to embalmers by funeral parlors w) Income payments made to suppliers of agricultural products x) Income payments on purchases of mineral, mineral products and quarry resources 7) What income payments are subject to Final Withholding Tax? a) Income Payments to a Citizen or to a Resident Alien Individual: Interest on any peso bank deposit Royalties Prizes (except prizes amounting to P10,000 or less which is subject to tax under Sec. 25(A)(1) of the Tax Code Winnings (except from Philippine Charity Sweepstake Office and Lotto) Interest income on foreign currency deposit Interest income from long term deposit Cash and/or property dividends Capital Gains presumed to have been realized from the sale, exchange or other disposition of real property b) Income Payments to a Non-Resident Alien Engaged in Trade or Business in the Philippines On Certain Passive Income - cash and/or property dividend - Share in the distributable net income of a partnership - Interest on any bank deposits - Royalties - Prizes (except prizes amounting to P10,000 or less which is subject to tax under Sec. 25(A)(1) of the Tax Code. - Winnings (except from Philippine Charity Sweepstake Office and Lotto) Interest on Long Term Deposits Capital Gains presumed to have been realized from the sale, exchange or other disposition of real property c) Income Derived from All Sources Within the Philippines by a Non-Resident Alien Individual Not Engaged in Trade or Business On gross amount of income derived from all sources within the Philippines On Capital Gains presumed to have been realized from the sale, exchange or disposition of real property located in the Philippines d) Income Derived by Alien Individual Employed by a Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies e) Income Derived by Alien Individual Employed by Offshore Banking Units f) Income of Aliens Employed by Foreign Petroleum Service Contractors and Subcontractors g) Income Payment to a Domestic Corporation Interest from any currency bank deposits and yield or any other monetary benefit from deposit substitutes and

from trust fund and similar arrangements derived from sources within the Philippines Royalties derived from sources within the Philippines Interest income derived from a depository bank under the Expanded Foreign Currency Deposit (FCDU) System Income derived by a depository bank under the FCDU from foreign transactions with local commercial banks On capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets, including pacto de retro sales and other forms of conditional sales based on the gross selling price or fair market value as determined in accordance with Sec. 6(E) of the NIRC, whichever is higher h) Income Payments to a Resident Foreign Corporation Offshore Banking Units Tax on branch Profit Remittances Interest on any currency bank deposits and yield or any other monetary benefit from deposit substitute and from trust funds and similar arrangements and royalties derived from sources within the Philippines Interest income on FCDU Income derived by a depository bank under the expanded foreign currency deposits system from foreign currency transactions with local commercial banks i) Income Derived from all Sources Within the Philippines by a Non-Resident Foreign Corporation Gross income from all sources within the Philippines such as interest, dividends, rents, royalties, salaries, premiums (except re-insurance premiums), annuities, emoluments or other fixed determinable annual, periodic or casual gains, profits and income or capital gains; Gross income from all sources within the Philippines derived by a non-resident cinematographic film owner, lessor and distributor On the gross rentals, lease and charter fees derived by a non-resident owner or lessor of vessels from leases or charters to Filipino citizens or corporations as approved by the Maritime Industry Authority On the gross rentals, charter and other fees derived by a non-resident lessor of aircraft, machineries and other equipment Interest on foreign loans contracted on or after August 1, 1986 j) Fringe Benefits Granted to the Employee (except Rank and File) Goods, services or other benefits furnished or granted in cash or in kind by an employer to an individual employee (except rank and file) such as but not limited to the following: - Housing - Vehicle of any kind - Interest on loans - Expenses for foreign travel - Holiday and vacation expenses - Educational assistance to employees or his dependents - Membership fees, dues and other expense in social and athletic clubs or other - similar organizations - Health insurance - Informers Reward 8) What are the types of withholding tax on government money payments? a) Withholding of Creditable Value Added Tax On gross payments for the purchase of goods On gross payments for the purchase of services Payments made to government public works contractors Payments for lease or use of property or property rights to non-resident owners b) Withholding of Percentage Tax

 Payments to the following: Any person engaged in business whose gross sales or receipts do not exceed P 550,000 and who are not VATregistered persons. (Persons exempt from VAT under Sec. 109z of the Tax Code) Domestic carriers and keepers of garages, except owners of bancas and owners of animal drawn two wheeled vehicle Operators of international carriers doing business in the Philippines. Franchise grantees of electric, gas or water utilities Franchise grantees of radio and/or television broadcasting companies whose gross annual receipts of the preceding year do not exceed Ten Million (P10,000,000.00) Pesos and did not opt to register as VAT Taxpayers Banks and non-bank financial intermediaries and finance companies Life insurance companies Agents of foreign insurance companies Proprietor, lessee, or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jai-alai and race tracks Every stock broker who effected a sale, barter, exchange or other disposition of shares of stock listed and traded through the Local Stock Exchange (LSE) other than the sale by a dealer in securities A corporate issuer/stock broker, whether domestic of foreign, engaged in the sale, barter, exchange or other disposition through Initial Public Offering (IPO) /secondary public offering of shares of stock in closely held corporations 9) Who is a withholding agent? A withholding agent is any person or entity who is required to deduct and remit the taxes withheld to the government. 10) What are the duties and obligations of the withholding agent? The following are the duties and obligations of the withholding agent: a) To Register - withholding agent is required to register within ten (10) days after acquiring such status with the Revenue District office having jurisdiction where the business is located b) To Deduct and Withhold - withholding agent is required to deduct tax from all money payments subject to withholding tax c) To Remit the Tax Withheld - withholding agent is required to remit tax withheld at the time prescribed by law and regulations d) To File Annual Return - withholding agent is required to file the corresponding Annual Information Return at the time prescribed by law and regulations e) To Issue Withholding Tax Certificates - withholding agent shall furnish Withholding Tax Certificates to recipient of income payments subject to withholding 11) Who are required to file Withholding Tax returns? a) For BIR Form 1600 - Monthly Remittance of Value-Added Tax and Other Percentage Tax - All government offices, bureaus, agencies or instrumentalities, local government units, government owned and controlled corporation on money payments made to private individual, corporations, partnerships, association and other judicial/artificial entities required under RA Nos. 1051, 7649, 8241 and 8424 - Payors to non-residents receiving income subject to Value-Added Tax b) For BIR Form 1600WP - Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Racetrack Operators - Operators of race tracks

c) For BIR Form 1601C- Monthly Remittance Return of Income Tax Withheld on Compensation - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on compensation paid to employees d) For BIR Form 1601E - Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on income payments subject to Expanded/Creditable Withholding Taxes e) For BIR Form 1601 F - Monthly Return of Final Income Taxes Withheld - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on income payments subject to Final Withholding Taxes f) For BIR Form 1602 -Monthly Remittance Return of Final Income Taxes Withheld (On Interest Paid on Deposits and Yield on Deposit Substitutes/Trusts/Etc.) - Banks, non-bank financial intermediaries, finance corporations, investment and trust companies and similar institutions g) For BIR Form 1603 - Quarterly Remittance Return of Final Income Taxes Withheld (On Fringe Benefits Paid to Employees Other than Rank and File) - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on fringe benefits furnished to employees other than rank and file subject to Final Withholding Tax h) For BIR Form 1604CF - Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Tax - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on compensation paid to employees - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on income payments subject to Final Withholding Taxes i) For BIR Form 1604E - Annual Information Return of Creditable Income Taxes Withheld (Expanded) Income Payments Exempt from Withholding Tax - Every withholding agent/payor who is either an individual or non-individual required to deduct and withhold taxes on income payments subject to Expanded/Creditable Withholding Taxes j) For BIR Form 1606 - Withholding Tax Remittance Return (For Onerous Transfer of Real Property Other than Capital Assets (Including Taxable and Exempt) - Every withholding agent/buyer on the sale, transfer or exchange of real property classified as ordinary assets. One return should be filed for every property (including portion of a property) purchased. Withholding Tax on Compensation is the tax withheld from income payments to individuals receiving purely compensation income arising from an employer-employee relationship. - Expanded Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year. - Final Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income. - Withholding Tax on Government Money Payments (GMP) is a tax withheld by government bureaus, offices and instrumentalities, including government-owned or-controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations. -Withholding Tax on GMP Percentage Taxes - is the tax withheld by government bureaus, offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations from non-VAT taxpayers

-Withholding Tax on GMP VAT Taxes - is the tax withheld by government bureaus, offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations who are VAT registered.