RR No. 17-2003: Amends further pertinent provisions of RR Nos. 2-98, 8-98 and 13-99, as amended, by providing for additional transactions subject to Creditable Withholding Tax and re-establishing the policy that the Capital Gains Tax on the sale, exchange or other disposition of real property classified as capital assets shall be collected as a Final Withholding Tax

Summary

RR No. 17-2003 further amends RR Nos. 2-98, 8-98 and 13-99, adding income payments subject to creditable withholding tax and making the Capital Gains Tax on sales of real property classified as capital assets a final withholding tax.

Key points

1. 6% final withholding on capital assets. Capital gains presumed from the sale of Philippine real property classified as capital assets are subject to 6% final withholding tax, based on the higher of gross selling price or fair market value. This covers citizens and resident aliens (real property) and domestic corporations (land and building).
2. Installments and sales to government. Installment sales of capital asset property follow the ordinary asset procedures, except the withholding is final. For sales by individuals to the government, its political subdivisions, agencies or government-owned or controlled corporations, the seller chooses between the normal rate under Section 24(A) and the 6% final tax under Section 24(D)(1).
3. Principal residence. The buyer withholds the 6% Capital Gains Tax from the seller and deposits it in an interest-bearing Authorized Agent Bank account under an Escrow Agreement. The amount is released to the seller only on RDO certification that the proceeds went to a new principal residence within eighteen (18) calendar months from the sale.
4. New creditable withholding rates. Payments to residents are subject to creditable withholding tax at these rates: 5% on gross rental of personal property over P 10,000.00 annually, 2% on labor recruiting agencies and labor-only contractors, 10% on broker commissions and fees of agents of professional entertainers, 10% on medical practitioners’ professional fees, 1% or 2% on payments by the top 10,000 private corporations to suppliers of goods or services, 2% on government payments to suppliers (except casual purchases of P10,000.00 and below), 10% on commissions to sales representatives and agents, 1% on regular agricultural suppliers (except casual suppliers with annual gross purchases not over P 20,000), and 1% on minerals and quarry resources.
5. Real property buyers. Buyers of taxable real property, whether or not in trade or business, act as withholding agents. No CAR/Tax Clearance Certificate is issued to the buyer until the withholding tax due is paid.

Who is affected

• Citizens and resident aliens selling capital asset real property
• Domestic corporations selling land and building classified as capital assets
• Buyers of real property
• Payors of the listed income payments

Deadlines and effectivity

• Covers income payments made starting June 1, 2003

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.