It sounds like a award lists but it's a land mine. BIR will choose and notify (written) the private company that you are now under TTC. All large taxpayer companies are automatically considered as one of TTCs once they receive the written notice. Once the company receive the letter, it should start withholding right away.
Some standards are: (Any of the following conditions are met)
a) Large Tax payers (Top 5,000, 10,000 private company)
b) VAT payment or payable whichever is higher, of at least P100,000 for the preceding year;
c) Annual income tax due of at least P200,000 for the preceding year;
d) Total percentage tax paid of at least P100,000 for the preceding year;
e) Gross sales of P10,000,000 and above for the preceding year;
f) Gross purchases of P5,000,000 and above for the preceding year;
g) Total excise tax payment of at least P100,000 for the preceding year.
Expanded Withholding Tax (EWT) or Creditable Withholding Tax (CWT)
It is the tax which is withheld by the buyer/withholding agent from his payment to the seller for the sale of the seller’s ordinary asset/services, and which tax is creditable against the income tax payable of the seller. Seller secure BIR form 2307 from the buyer which tells that the buyer already withheld certain amount and remitted it to the BIR in lieu of the seller. For the seller, it's like paying tax in advance even though it's not paid by me. So the seller use 2307 form as a proof that "I already paid income tax" and deduct the amount from the tax due.
a) A advance income taxes collection system
b) A check and balance mechanism
It is the tax which is withheld by the buyer/withholding agent from his payment to the seller for the sale of the seller’s ordinary asset/services, and which tax is creditable against the income tax payable of the seller. Seller secure BIR form 2307 from the buyer which tells that the buyer already withheld certain amount and remitted it to the BIR in lieu of the seller. For the seller, it's like paying tax in advance even though it's not paid by me. So the seller use 2307 form as a proof that "I already paid income tax" and deduct the amount from the tax due.
a) A advance income taxes collection system
b) A check and balance mechanism
Withholding Tax for Regular Items
It's applied to all taxpayers. To claim as deductible expenses, you should withhold certain percentage from the payment. Some typical items are as follows:
Special rate for TTC
For TTC taxpayers, there is additional withholding tax obligation on top of the regular items. They should withhold tax for expenses that are not listed in the specific income payments.
a) When they purchase from their regular suppliers of goods or services. ("regular" means at least 6 transactions during the taxable year.)
c) Casual purchases from non-regular suppliers worth at least PhP10,000.
EWT Exemptions
a) Payment to income tax exempt entities (government, foundations, PEZA-registered, ITH, etc)
In this case, the payer should secure Certificate of tax exemption (CTE) not to withhold as a proof.
Notes: So, just retaining an accountant is not good enough. You should train some of your employee to comply with this rule since if they don't know the details (invoicing/proof)...the expenses can not be deducted form gross income.
It's applied to all taxpayers. To claim as deductible expenses, you should withhold certain percentage from the payment. Some typical items are as follows:
- Rental or lease payments - 5%
- Professional fees - 10% or 15%
- Payments to contractors - 2%
- Payment to advertising agencies - 2%
- Commissions - 10%
Special rate for TTC
For TTC taxpayers, there is additional withholding tax obligation on top of the regular items. They should withhold tax for expenses that are not listed in the specific income payments.
a) When they purchase from their regular suppliers of goods or services. ("regular" means at least 6 transactions during the taxable year.)
c) Casual purchases from non-regular suppliers worth at least PhP10,000.
- Purchase of goods - 1%
- Purchase of services - 2%
EWT Exemptions
a) Payment to income tax exempt entities (government, foundations, PEZA-registered, ITH, etc)
In this case, the payer should secure Certificate of tax exemption (CTE) not to withhold as a proof.
Notes: So, just retaining an accountant is not good enough. You should train some of your employee to comply with this rule since if they don't know the details (invoicing/proof)...the expenses can not be deducted form gross income.