RR No. 6-2018: Revokes Revenue Regulations (RR) No. 12-2013 relative to the requirements for deductibility of certain expenses, thereby reinstating the provisions of Section 2.58.5 of RR No. 14-2002, as amended by RR No. 17-2003

Key points

1. General rule. An income payment that is otherwise deductible is allowed as a deduction from the payor’s gross income only if the required withholding income tax has been paid to the BIR.
2. Payee reported the income. A deduction is allowed even without withholding if the payee reported the income and paid the tax. The withholding agent must then pay the tax, with interest for the failure to withhold and surcharges if applicable, at the time of audit, investigation, reinvestigation or reconsideration.
3. Payee did not report. If the payee failed to report the income on its due date, the deduction is allowed when the withholding agent pays the tax, interest and any surcharges at that stage.
4. Underwithholding. If the tax was erroneously underwithheld, the deduction is allowed when the agent pays the difference, with interest and any surcharges.
5. Return of capital items. Items such as purchases of raw materials in finished products and goods for resale are allowed upon the agent’s payment of the basic withholding tax and penalties for non-withholding or underwithholding.

Who is affected

• Withholding agents and payors claiming deductions