RR No. 30-2003: Amends further pertinent portions of RR Nos. 2-98 and 8-98, as amended, providing withholding as a mode of remitting final Capital Gains Tax on the sale of real property classified as capital assets by non-resident aliens, increasing the withholding tax rates on certain income payments, inclusion of non-food products in the coverage of expanded withholding tax, providing sanctions to payees who refuse the withholding of tax on their income/receipts, and for other purposes.

Key points

1. Real property sales by non-resident aliens. Presumed capital gains from the sale or other disposition of Philippine real property classified as capital assets, including pacto de retro and other conditional sales, are subject to 6% final withholding tax. The base is the gross selling price or fair market value, whichever is higher, and it applies whether or not the non-resident alien is engaged in trade or business in the Philippines.
2. Installment sales and sales to government. For installment sales of capital asset real property, the procedures for ordinary assets apply, but the withholding is final for capital assets and creditable for ordinary assets. For sales by individuals to the government, its political subdivisions or agencies, or GOCCs, the seller may choose tax under Sec. 24(A) of the Tax Code or the 6% final tax under Sec. 24(D)(1).
3. Creditable withholding rates. Government payments to local suppliers: 1% for goods and 2% for services. Agricultural suppliers: 1%, except casual suppliers whose annual gross purchases do not exceed P 20,000. Contractors: 2% on gross payments. Professional and talent fees, including partners of general professional partnerships and medical practitioners: 15% if gross income for the current year exceeds P 720,000, and 10% if P 720,000 and below.
4. Sworn declaration of income. Individual professionals, talents and corporate directors submit a notarized sworn declaration (3 copies) of current year gross income to the BIR, to fix the 10% or 15% rate. It is filed June 30 of each year or within 15 days after the month income reaches P 720,000, whichever is earlier. A payee under P 720,000 on June 30 files a second disclosure within 15 days after the month income reaches P 720,000. The payee gives each payor a BIR-stamped copy within five (5) days of BIR receipt, and the payor withholds 15% if the June 30 declaration is not submitted and furnished. The same applies to taxable juridical persons (declaration by the president or managing partner), partners and medical practitioners.
5. Agents, brokers and who withholds. Agents, employees or others buying or paying on behalf of withholding agents withhold for them. Receipts or invoices are issued in the name of the person represented, with BIR Form No. 2307 issued immediately. Withholding is done by the person with control over the payment who claims the expense, including payments through brokers or agents.
6. Refusal and accrued income. The buyer-payor is obliged to withhold, though the burden is on the seller. A seller’s unjustifiable refusal of withholding is a ground for mandatory audit of income tax liabilities, including withholding tax, upon the buyer-payor’s verified complaint. Income accrued before January 1, 2004 follows the withholding rate at the time of accrual and is withheld and remitted when it accrues.

Who is affected

• Non-resident alien individuals selling Philippine real property
• Withholding agents
• Professionals, talents, corporate directors and medical practitioners
• Contractors and suppliers of goods, services and agricultural products

Deadlines and effectivity

• Effective January 1, 2004
• Sworn declaration due June 30 or within 15 days after the month income reaches P 720,000
• Copy to payors within five (5) days from BIR receipt