I have different transactions from my business that are subject to withholding tax. When would my withholding taxes be payable under Ease of Paying Taxes (EOPT) law?
Under the EOPT law, the withholding tax is only required when the income becomes payable. Additionally, the payor’s obligation to deduct and withhold taxes arises at the earliest of these events: when the income is accrued or recorded as an expense or asset in the payor’s books, or when the seller issues a sales invoice or other adequate document to support the payable.
If you recall, previously, the tax had to be withheld when income payments were either paid or became payable whichever comes first.
Previously, the withholding of tax was a requirement to claim a deductible expense. Now, this requirement has been removed. Are we still liable to pay withholding tax on our purchases?
Yes, taxpayers are still liable to withhold tax on their income payments. The EOPT only removed the requirement to withhold for an expense to be deductible but it did not remove the obligation to withhold.
Under Revenue Memorandum Circular No. 60-2024, for the taxable year January 1, 2024 onwards, the taxpayer can deduct expenses even if no tax was withheld, provided that the expense is necessary, ordinary, duly substantiated, and related to the registered business of the taxpayer.
Our company has ongoing cases covering taxable year 2022. One of the findings is the disallowed expenses due to non-withholding. Can we still claim the expenses if the corresponding withholding tax was paid?
Yes, you can still do so. For all ongoing cases prior to January 1, 2024, expenses subject to withholding tax shall be allowed as deductions from gross income if the corresponding withholding tax required to be withheld has been paid. Hence, the requirements to have withholding tax on expenses to be deductible are still applicable for the said taxable years.
In case you failed to withhold tax on certain expenses and did not pay the same prior to the submission of an audit report to the reviewing office, the RO has to recommend for the issuance of assessment notice for both income and withholding tax.
CONSULT ACG to ensure a simplified tax compliance for businesses and individuals under the newly-issued provision on withholding tax in the Ease of Paying Taxes Law.
– Rappler.com