RR No. 14-2003: Amends RR No. 2-98 to simplify the collection of tax through withholding at source on sales of goods or services subject to the 3% Percentage Tax and/or the Value-Added Tax

Key points

1. Withholding rates. A person buying goods or paying for services in the course of trade or business withholds 3% Percentage Tax on the payee’s gross sales or receipts if the payee is non-VAT registered, or VAT at 10% if the payee is VAT-registered. In both cases the payee has opted for withholding by filing a Notice of Availment of the Option to Pay the Tax through the Withholding Process, and VAT payees also execute a Waiver of the Privilege to Claim Input Tax Credits.
2. Remittance and substituted filing. The payor remits the tax using BIR Form No. 1600. That return is also the payee’s substituted Percentage Tax or VAT return if the payee has only one payor and files a Notice of Availment of the Substituted Filing with the Revenue District Office.
3. Payee with several payors. The tax withheld and remitted by the payors is a creditable tax on the payee’s Monthly Percentage Tax return (BIR Form No. 2551M) or Quarterly VAT return (BIR Form No. 2550Q).
4. Duration of the option. The withholding option stays until the payee cancels it. Substituted filing continues in later taxable years until an additional client or customer comes in, when the payee files a Notice of Cancellation not later than the 10th day of the month after the close of the taxable year.
5. Receipts and summary lists. Sellers of services whose gross receipts have 3% Percentage Tax or 10% final VAT withheld need not issue registered non-VAT or VAT receipts. BIR Form No. 2306 (one payor) or BIR Form No. 2307 (several payors) serves as the substituted official receipt, while VAT-registered sellers still comply with RR No. 8-2002 on quarterly summary lists of sales, domestic purchases and importation.

Who is affected

• Persons buying goods or paying for services in the course of trade or business
• Non-VAT and VAT-registered payees who opt for withholding
• Payees with one payor or several payors

Deadlines and effectivity

• Notice of Cancellation of substituted filing: not later than the 10th day of the month after the close of the taxable year