RMO No. 23-2014: Clarifies and consolidates the obligations of government agencies, bureaus and instrumentalities as Withholding Agents

Key points

1. Creditable income tax on payments. Government offices, including GOCCs and provincial, city and municipal governments, withhold 2% on gross payments to contractors, 1% on local suppliers of goods, 2% on local suppliers of services, and 5% on gross rentals of real property used in business. Casual purchases of not more than P10,000.00 are not subject to the 1% or 2%.
2. Government money payments. Purchases from VAT-registered suppliers bear 5% of the gross payment, or 12% if payment for lease or use of property rights is due to non-resident owners. Purchases from non-VAT registered suppliers bear 3%, and Purchase Order and Petty Cash purchases are subject to the 5% final VAT withholding.
3. Foreign contractors. The same rates apply to Resident Foreign Contractors. Non-Resident Foreign Contractors are subject to 25% for individuals and 30% for foreign corporations, subject to applicable tax treaty.
4. Compensation of employees. Government offices withhold on compensation, which includes salaries, honoraria, allowances, commissions, taxable bonuses and fringe benefits, and taxable pensions. Advances and reimbursements for authorized expenses are not compensation if accounting and liquidation rules are met and receipts are in the government office’s name. Intelligence funds not duly appropriated and properly liquidated form part of compensation unless returned.
5. Excluded from income tax and withholding. These include 13th month pay and other benefits not exceeding P30,000.00, de minimis benefits within ceilings, RATA, PERA, monetized leave credits, mandatory GSIS, Medicare and Pag-Ibig contributions, union dues, and compensation of not more than the Statutory Minimum Wage. Voluntary contributions above the mandatory amount are not excluded.
6. Officials duty bound to withhold. For provinces, cities and municipalities these are the Chief Accountant, the Treasurer and the Governor or Mayor. For barangays they are the Barangay Treasurer and Captain, and for NGAs and GOCCs the Chief Accountant and the Head of Office. They are liable for sanctions specified in the Order if they fail to comply.

Who is affected

• Government offices, bureaus and instrumentalities
• GOCCs
• Provincial, city, municipal and barangay governments
• Government officials and employees

Deadlines and effectivity

• Issued June 20, 2014