Q: May an entity be exempted from the payment of creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98, as amended, on account of registration with the Philippine Economic Zone Authority (PEZA)?
A: Yes. Section 2.57.5.(B) (2) of Revenue Regulations No. 2-98, as amended, is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. PEZA-registered enterprises are granted certain preferential tax treatment under Section 24 of Republic Act No. 7916 which provides that "any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government.
A PEZA-registered enterprise enjoying a 4-year-ITH, income payments made to it, with respect to its registered activity, shall not be subject to 2% expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, for the covered period of four (4) years. It must be emphasized, however, that it is constituted as withholding agent for the government. As such, it is required to withhold the tax on compensation income of its employees or the withholding tax on income payments to persons subject to tax pursuant to Section 57 of the Tax Code of 1997, as amended.
(BIR Ruling No. 142-10, December 9, 2010)
Thanks for the info. One thing to ask we are a PEZA registered enterprise and we receive billings from our supplier. Are we allowed to withheld the EWT for that particular supplier? I mean instead of paying a fee for 20,000.00 php (service invoice billing amount) we only pay 19,600? (less 2% EWT) Appreciate response. Thanks
ReplyDeleteThis comment has been removed by the author.
DeleteYes, your company is the one exempt from wtax because you do not pay income tax under NIRC. Hence, there is no purpose for wtax/prepaid tax as there will never be any income tax liability. PEZA entities are subject to tax holiday or special tax on gross income like 5%
ReplyDeleteThank you for the info. it helps a lot :)
ReplyDeleteHi Alvin again, would you mind to answer if you just have any idea pertaining to withholding taxes for condominium dues? Are they considered rent (5% EWT)? or service (2%)? I am hesitant and a bit confused of what should be the rate appropriate for them? Appreciate response. Thank you.
ReplyDeleteI think it is 5% if the charges are included in the rent or included in just one billing statement or invoice, otherwise if it is separately billed or invoiced, it is subject to 2%.
ReplyDeleteHi Alvin,
ReplyDeleteWhat is the income tax rate on compensation of employees of PEZA-registered entities? Are they subject to special rate?
Thank you.
EJ
Regular tax rates. It is the PEZA company that is exempt from tax and exemption does not extend to the employee, simply because you are employed by PEZA company.
DeleteSame as the regular compensation taxes except FBT, because the exempt is the peza-registered entity and its exemption does not extend to the employees.
ReplyDeleteHi,
DeleteGood day!
I would like to ask if PEZA-registered company are allowed to deduct withholding tax for their payment with their supplier.
Thank you.
Yes, they are allowed to withhold tax from their suppliers. PEZA-registered company are granted the wtax exemption, not the other way around.
DeleteBut peza registered entities are not to withhold taxes on purchases of goods right? only on services and professional fees incurred. Where can i get the rulings for this. Thanks
DeleteYes, only PEZA entity is exempt from income tax and withholding tax and not the supplier. Exemption does not extend to your supplier
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ReplyDeleteHi! Question: Are PEZA entity exempt from withholding 1% and 2% to supplier of goods/services because they aren't included in the top 10K corp? thanks
ReplyDeleteYes, PEZA registered companies may not withhold tax if they are not granted by BIR as withholding agents
DeleteAs mentioned above, a PEZA-registered enterprise enjoying a 4-year-ITH (or any specific duration)shall not be subject to 2% expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98.. if upon expiration of the ITH , are they already subject to 2% expanded creditable withholding tax ?
ReplyDeleteYes, because their income is no longer exempted to tax. However, if they have special tax rate (e.g. preferential income tax rate of 5% on gross income), then they are still not subject from withholding tax.
DeleteHi Theo, for clarification, our company is PEZA registered located within Ecozone, we rent our office/production within compound also a PEZA registered, do we need to withheld 5% EWT for this, coz in the contract there is no provision for that only doc stamp
ReplyDeletethanks, appreciate your response
It depends if leasing the subject property is the lessor's registered activity that is exempt from income tax and consequently, from withholding tax. You should request for the lessor's PEZA registration document and its BIR certificate for the taxable year to determine the answer to your query. It will be also good to keep copies of these supporting documents, in case there will be BIR tax investigation.
DeleteHi,
ReplyDeleteWe are a leasing & finance company, we will be releasing a proceeds to a certain PEZA company under sale & leaseback facility.. Do we need to withhold them at 1%? Thanks!
Check if that is part of the registered activity of that PEZA company, if yes, it is exempt, otherwise, deduct withholding tax.
DeleteHi,
ReplyDeleteWe are a peza reigstered company renting to a peza registered company as well, are we required to withheld the rental at 5%?
Thank you.
It depends if leasing the subject property is the lessor's registered activity that is exempt from income tax and consequently, from withholding tax. You should request for the lessor's PEZA registration document and its BIR certificate for the taxable year to determine the answer to your query.
DeleteHello,
ReplyDeleteHow can we know if we are a Top Withholding Agent Company? I checked in BIR website the list of Top withholding tax agent, and I didn't find our company there, is that mean we're not obligated to deduct withholding tax to our suppliers?
Thank you.
Hi Apple, the BIR will send you a letter stating that you are one of the top withholding tax agent.
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ReplyDeleteHi,
ReplyDeleteGood Afternoon.
I just want to ask, we are a peza registered company and all our suppliers is under to PEZA also. are we allowed to deduct them a withholding tax? Thank you. BTW, we dont have a ITH.
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ReplyDeleteHi. Would like to ask if PEZA entities are required to withhold final taxes on purchase of services outside the Philippines? These expenses are directly related to their customers outside the Philippines also. Thank you.
ReplyDeleteWe have PEZA ERD Form No-03-01 in this income payments to PEZA registered enterprises under ITH and 5% GIT incentive are exempt from expanded withholding tax, it mean we are except from BIR EWT 1% AND 2% Is it right.
ReplyDeleteNow our customer want to deduct EWT 1% On total purchase value,
We are PEZA Registered company, are we still exempt from 1% for goods and 2% for services.. withholding tax
ReplyDelete, if our customer is TAMP or Top Withholding Agent?
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Hi would like to ask if Association inside PEZA is also exempt from withholding tax?
ReplyDeleteHi would like if this is also applied in CEZA
ReplyDelete