Mon. Aug 19th, 2019

2018 Updates of Withholding tax in the Philippines

Here are the updates of withholding tax in the Philippines under the new tax reform- TRAIN law 2018. It includes the updated withholding tax rates. The definition of the withholding tax is also well define. What are the income subject to withholding tax for a citizen, resident alien in the Philippines?. There are other income received by the resident citizen subject to withholding tax rate.

Did you know that some taxes are confusing to the government to collect, so to make sure the government authorized any person to withhold the fees corresponding to the income. After the issuance of the TRAIN Tax law 2018, what are the updates about the withholding tax in the Philippines?.

What is Withholding Tax?

Before we know the updates, it is best for us to know what withholding tax mean. The amount of tax withheld is on the income of the recipient not covered by the income tax rate. The fee is withheld or deducted from the amount received by the recipient.

The tax withheld by the government can be refunded by the recipient if the total tax withheld is more significant than the actual fee to be paid by the recipient of income.

Here are some of these incomes that are subject to a withholding tax under the TRAIN law 2018.

Citizen or a Resident Alien Individual

Some taxes could be challenging for the government to collect. Here are some updates of income that are subject to withholding tax.

  1. Twenty percent (20%) final tax on the Interest income from any peso bank deposit, and yield or any monetary benefit from deposit substitutes is collected. It includes trust funds and similar arrangement, royalties, prizes, and other winnings derived from sources within the Philippines.
  2. Fifteen percent (15%) final tax withholding on the interest income from a depository bank. This depository bank is under EFCDS-Expanded Foreign Currency Deposit System.
  3. Ten percent (10%) final tax withhold on cash or property dividends. Either, actually or constructively received from a company and ROH of multinational companies.
  4. Withhold a 10% on the share of an individual in the distributable net income after tax of a partner in a partnership. It excludes GPP or on the share in the net profit after tax of an association, a joint account or a joint venture or consortium taxable as a corporation which he is a member or co-venturer.
  5. Fifteen percent (15%) on capital gains from the sale of shares of stock not traded in the stock exchange.

Non-resident Aliens Engaged in Trade or Business

Fifteen percent (15%) of a final tax capital gains from the sale of shares of stock not traded. It should be the net capital gains realized during the taxable year from the sale, barter, transfer, or other disposition of shares to stock in a domestic corporation.

Non-resident Alien Individual Not Engage in Trade or Business

Generally, all incomes realized by the non-resident alien individual not engaged in trade or business within the Philippines are subject to final withholding tax.

In 2018, updates on capital gains from the sale of shares of stock not traded in the stock exchange were subject to fifteen percent (15%) of final tax.

Income Payment to a Domestic Corporation

Some of these updates include the interest income derived from the following:

  1. Depository bank under the expanded foreign currency deposit system
    2. Capital gains from the sale of shares of stock not traded in the stock exchange.

15% Final tax withholding on the interest income from deposits under EFDCS. This withholding tax rate applies to capital gains realized during the taxable year from the sale, barter, exchange. Withhold 15% on the disposition of shares of stock in a domestic corporation is fifteen percent (15%).

Fringe Benefits Granted to a Non-rank and File Employees

The particular law mandates some benefits in the Philippines to all employees. These benefits are called as de minimis benefits. However, there are benefits given by the employer to a non-rank and file employees to pay their loyalty or longtime services and contributions to the company. These benefits could be a service, products, or in cash. 

Any fringe benefits received by a citizen, resident alien or non-resident alien engaged in trade or business within the Philippines are subject to a thirty-five percent (35%) and twenty-five percent (25%) to any fringe benefits received by a non-resident alien not engaged in trade or business within the Philippines.

Other incomes subject to Withholding Tax

  1. Income paid to a resident foreign corporation.
  2. Revenues derived from all sources within the Philippine by a non-resident foreign corporation.
  3. Informer’s reward to persons instrumental in the discovery of violations of the NIRC and the exploration and seizure of smuggled goods.

Conclusions

Not all incomes earned are subject to withholding tax under the new tax reform- TRAIN tax law 2018. Only those incomes that are not subject to the income tax rate. Do you want to know updates about the income tax in the Philippines?

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