RMC No. 23-2007: Clarifies the computations of Withholding Taxes and other requirements on Government Money Payments due or payable to suppliers of goods and/or services, in connection with the implementation of Republic Act No. 9337, as amended, and other related law and regulations

Key points

1. Final VAT and income tax withholding. The 5% Final VAT withholding on GMP under Section 4.112-2 of RR No. 16-2005, as amended, is applied together with the Income Tax withholding under RR No. 2-1998, as amended. That withholding is 1% on purchase of goods and 2% on purchase of services, and its basis is net of VAT.
2. Purchases outside the withholding. Purchases recorded as reimbursable allowance, benefit or incentive to a government official or employee (e.g. RATA) are not covered by the 5% final VAT withholding or the 1% or 2% Income Tax withholding. Casual government purchases of not more than P10,000.00 are also not subject to the 1% or 2% Income Tax withholding. Purchases covered by signed Purchase Orders and purchases from the Petty Cash Fund are subject to the 5% final VAT withholding.
3. Forms for VAT and income tax. The person in charge of withholding in each government agency prepares BIR Form 1600 and 1601-E, both filed on or before the 10th day of the month following the withholding. December transactions on Form 1601-E are filed on or before January 15 of the succeeding year. BIR Form 2306 goes to the supplier within 10 days after the end of the month of withholding, and BIR Form 2307 for Income Tax goes to the supplier not later than the 20th day of the month after the quarter close, or upon demand.
4. SAWT attachments. Certificates and the hard copy of the Summary Alphalist of Withholding Taxes (SAWT) are attached to the seller-payee’s return where there are not more than 10 withholding agents. Where there are more than 10 withholding agents, the certificates are used to prepare an electronic SAWT. EFPS filers always submit the SAWT in electronic format.
5. Percentage Tax purchases. Government purchases subject to Percentage Tax are governed by RA No. 1051 and RR No. 2-1998, as amended. The agency files Forms 1600 and 1601-E and the Monthly Alphalist of Payees under RR No. 2-2006. A separate BIR Form 2307 for Percentage Tax goes to the supplier not later than the 10th day of the month after the month of withholding, so one transaction may have two sets of Form 2307.
6. Withholding rates. The specific Income Tax withholding rates in RR No. 2-1998, as amended, are followed. The 1% rate for goods and 2% rate for services apply only to income payments not specifically listed in those Regulations.

Who is affected

• Government agencies, bureaus, LGUs and GOCCs as withholding agents
• Suppliers of goods and/or services to the government

Deadlines and effectivity

• Forms 1600 and 1601-E: on or before the 10th day of the month following withholding
• Form 1601-E for December transactions: on or before January 15 of the succeeding year
• Form 2306: within 10 days after the end of the month of withholding
• Issued March 22, 2007