RR No. 11-2018: Amends certain provisions of RR No. 2-98, as amended, to implement further amendments introduced by RA No. 10963 (TRAIN Law) relative to withholding of Income Tax

Key points

1. Final withholding tax. Section 2.57.1 is amended and renumbered. Rates include 20% on peso bank deposit interest, royalties, prizes and winnings, and 15% on interest under the Expanded Foreign Currency Deposit system. They also include 10% on cash and property dividends and 15% on net capital gains from unlisted shares of stock.
2. Fringe benefits. The fringe benefit tax is 35% for citizens, resident aliens and non-resident aliens engaged in trade or business, and 25% for non-resident aliens not engaged in trade or business. The grossed-up value is found by dividing by 65% for the 35% rate and by 75% for the 25% rate. Benefits required by the nature of the business, or for the convenience and advantage of the employer, are not subject to it.
3. Creditable withholding on professional fees. For individual payees, the rate is 5% if gross income for the current year did not exceed P3M, and 10% if more than P3M. For non-individual payees, it is 10% up to P720,000 and 15% above P720,000. Special rules cover fees paid to medical practitioners by hospitals, clinics and HMOs.
4. Exemptions from withholding. Section 2.57.5 exempts certain payees, including qualified socialized housing sellers and corporations exempt under Sec. 30 of the Tax Code. It also covers qualified joint ventures or consortia and individuals earning P250,000.00 and below from a lone income payor, who must submit a sworn declaration of gross receipts by January 15 of each year or before the initial payment.
5. Compensation income. Sections 2.78.1 to 2.83.4 are amended. The 13th month pay and other benefits are exempt up to P90,000, and de minimis benefits include rice subsidy of P2,000 or one 50kg sack per month and uniform allowance not exceeding P6,000 per annum. The regulations also list who must still file an income tax return despite substituted filing.
6. Sworn declarations and refunds. Payees seeking exemption from the prescribed rates submit an Income Payee’s Sworn Declaration of Gross Receipts/Sales with a copy of their Certificate of Registration on or before April 6, 2018. Payors submit their sworn declaration and payee list on or before April 20, 2018. Excess tax withheld is refunded by the payor and adjusted in the first quarter return filed on or before April 30, 2018.

Who is affected

• Withholding agents and income payors
• Income payees and professionals
• Employers and employees
• Hospitals, clinics and HMOs paying medical practitioners

Deadlines and effectivity

• Payee sworn declaration: on or before April 6, 2018
• Payor sworn declaration and payee list: on or before April 20, 2018
• First quarter return with adjusted amounts: on or before April 30, 2018