REVENUE REGULATION 11-2018

Withholding Tax under the TRAIN Law

SANTOS, Jonathan Atty. Bernaldo
VALLARIT, Anne Lizeth

Final Withholding Tax on Passive Income

NRA- NRA-
Passive Income RC/RA/NRC DC RFC NRFC
ETB NETB
Dividends/share in the
partnership other than 10% 20% 25% Exempt Exempt n/a
GPP
Cash and/or property
10% 20% 25% Exempt Exempt 15%/30%
dividend from a DC
Royalties from literary
works, books and 10% 20% 25% 20% 20% 30%
musical compositions
Royalties other than the
20% 20% 25% 20% 20% 30%
above
Interests (deposit
20% 20% 25% 20% 20% 30%
substitutes, trust funds)
Expanded Foreign
Currency Deposit 15% Exempt Exempt 15% 7.5% Exempt
System
Long Term Deposits Exempt Exempt 25% 30% 30% 30%
4-5 years 5% 5% 25%
3-4 years 12% 12% 25%
<3 Years 20% 20% 25%
Prizes: 10,000 or less GIT GIT 25% 30% 30% 30%
More than 10k 20% 20% 25% 30% 30% 30%
PCSO Winnings 20% Exempt 25%
If 10k or less GIT GIT 25%

Final Withholding Tax on Capital Gains

NRA- NRA-
Passive Income RC/RA/NRC DC RFC NRFC
ETB NETB
Sale of shares not
traded through the local 15% 15% 15% 15% 5%/10% 5%/10%
stock exchange
Sale of capital assets 6% 6% 6% 6% 30% 30%

Salient Features
Type of Income Payment OLD CWT Rate NEW CWT Rate
Professional fees, talent fees, etc. for Individual – 8% Individual
services rendered A. If the gross income
Non-individual – for the current year does
Professional fees paid to medical 10%/15% not exceed Php 3M –
practitioners (includes doctors of 5%
medicine, veterinary science and
dentists) by hospitals and clinics or B. If the gross income
paid directly by HMOs and/or similar for the current year is
establishments.
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
more than Php 3M –
Income payments to certain brokers 10%
and agents
Non-individual
Commissions of independent and/or A. If the gross
exclusive sales representatives and income for the current
marketing agents of companies year does not exceed
Php 720k – 10%

B. If the gross
income for the current
year is more than Php
720k – 15%
Income distribution to the beneficiaries 8% 15%

Income payments to partners of GPPs 8% If the gross income for

the year does not
exceed Php 720k – 10%

If the gross income for

the year does exceed
Php 720k – 15%

 A sworn declaration must be submitted by individual payees with gross receipts/sales not
exceeding P3,000,000 and non-individual payees with gross income not exceeding
P720,000. Failure to submit such declaration shall subject the taxpayer to higher tax rate.

 Income payors/withholding agents shall subsequently execute a sworn declaration stating

the number of payees who have submitted the income payees’ sworn declarations with the
accompanying copies of their Certificate of Registration. Such declaration of the income
payors/withholding agents shall be submitted, together with the list of payees, to the
concerned BIR office where registered on or before January 31 of each year or fifteen (15)
days following the month when a new income recipient has submitted the payee’s sworn
declaration.

 Joint ventures or consortium formed for the purpose of undertaking construction projects
shall comply with the following conditions to be considered as joint venture not taxable as
a corporation:
a) Should involve joining or pooling of resources by licensed local contracts; that is,
licensed as general contractor by the Philippine Contractors Accreditation Board
(PCAB) of the Department of Trade and Industry (DTI);
b) These local contractors are engaged in construction business; and
c) The Joint Venture itself must likewise be duly licensed as such by the PCAB of
the DTI.

 Individuals who earn ₱250,000.00 and below from a lone income payor upon compliance
with the following requirements:
a.The individual has executed a payee’s sworn declaration of gross receipts.
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
b. The sworn declaration has been submitted to the lone income payor/withholding
agent on or before January 15 of each year or before the initial income payment, whichever
is applicable.

Changes in de minimis benefits

De Minimis Benefit OLD CWT Rate NEW CWT Rate
Medical cash allowance to dependents P750 per employee per P1,500 per employee per
of employees semester or P125 per semester or P250 per
month month
Rice Subsidy P1,500 or one sack of P2,000 or one sack of
50kg rice per month 50kg rice per month
amounting to not more amounting to not more
than P1,500 than P2,000
Uniform and clothing allowance P5,000 per annum P6,000 per annum

 Income payments made by any of the top withholding agents, as determined by the
Commissioner, to their local/resident supplier of goods/services, including non-resident
aliens engaged in trade or business in the Philippines, shall be subjected to the following
withholding tax rates:
Supplier of goods – One percent (1%)
Supplier of services – Two percent (2%)

Top withholding agents shall include the following:

a. Classified and duly notified by the Commissioner as either any of the following
unless previously de-classified as such or had already ceased business operations:
(1) A large taxpayer under Revenue Regulations No. 1-98, as amended;
(2) Top twenty thousand (20,000) private corporations under RR No. 6- 2009;
(3) Top five thousand (5,000) individuals under RR No. 6-2009;
b. Taxpayers identified and included as Medium Taxpayers, and those under the
Taxpayer Account Management Program (TAMP).

 Any income subject to income tax may be subject to withholding tax; however, income
exempt from income tax is consequently exempt from withholding tax. Further, income not
subject to withholding tax does not necessarily mean that it is not subject to income tax.”

 In the case of employees under the public sector, the document to be attached is the
Department of Budget Management (DBM) Circular related to such payment of hazard pay.
Additional compensation such as commissions, honoraria, fringe benefits, benefits in
excess of the allowable statutory amount of ₱90,000.00, taxable allowances, and other
taxable income given to an MWE by the same employer other than those which are
expressly exempt from income tax shall be subject to withholding tax using the withholding
tax table.

Additional compensation such as commissions, honoraria, fringe benefits, benefits in

excess of the allowable statutory amount of ₱90,000.00, taxable allowances, and other
taxable income given to an MWE by the same employer other than those which are
expressly exempt from income tax shall be subject to withholding tax using the withholding
tax table.
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
Likewise, MWEs receiving other income from other sources in addition to compensation
income, such as income from other concurrent employers, from the conduct of trade,
business, or practice of profession, except income subject to final tax, are subject to income
tax only to the extent of income other than SMW, holiday pay, overtime pay, night shift
differential pay, and hazard pay earned during the taxable year. Any income subject to
income tax may be subject to withholding tax; however, income exempt from income tax is
consequently exempt from withholding tax. Further, income not subject to withholding tax
does not necessarily mean that it is not subject to income tax.

SECTION 7 – Amends Section 2.79 of RR No. 2-98

I. Requirement of Withholding

SEC. 2.79 OF RR NO. 2-98 RR NO. 11-2018

COVERAGE Employee is an individual Employee is a citizen or an
alien, except non-resident alien
not engaged in trade or
business
COMPENSATION P5,000 / monthly or Statutory Minimum Wage and
EXEMPT FROM TAX P60,000 per annum, additional compensation (fringe
whichever is higher benefit, commissions, overtime
(Statutory Minimum Wage) pay, etc) not exceeding
P90,000
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
II. Computation of Withholding Tax on Compensation Income in General

Withholding tax table for compensation paid from January 1, 2018 until December 31,
2022

Withholding tax table for compensation paid starting January 1, 2023

REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
1) Components of Withholding Tax Table. -
a. Column 1 pertains to the following details:
i. Payroll period
ii. Compensation range
iii. Prescribed withholding tax
b. Columns 2 to 7 show the tax due for each of the compensation range identified If the
compensation is paid other than daily, weekly, semi-monthly or monthly, the tax to be
withheld shall be computed as follows:
(a) Annually – use the annualized computation;
(b) Quarterly and semiannually – divide the compensation by three (3) or six (6)
respectively, to determine the average monthly compensation. Use the monthly
withholding tax table to compute the tax, and the tax so computed shall be
multiplied by three (3) or six (6) accordingly.
2) Steps to determine the amount of tax to be withheld
Step 1: Determine the total monetary and non-monetary compensation paid to an
employee for the payroll period: monthly, semi-monthly, weekly or daily, 27 / 47 as the case
may be, excluding non-taxable benefits and mandatory contributions.

Step 2. Use the appropriate and select the applicable payroll period.

Step 3. Determine the compensation range of the employee by taking into account only
the total amount of taxable regular compensation income and apply the applicable tax rates
prescribed thereon.

Step 4. Compute the withholding tax due by adding the tax predetermined in the
compensation range as indicated on the column used and the rate of tax on the excess of
the total compensation over the minimum of the compensation range.

3) Use of exceptional computations

A) Cumulative Average Method- exempt from withholding tax because the amount
thereof is below the compensation level, but supplementary compensation is paid
during the calendar year; or the supplementary compensation is equal to or more than
the regular compensation to be paid; or the employee was newly hired and had a
previous employer/s within the calendar year, other than the present employer doing
this cumulative computation.
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
The cumulative average method, once applicable to a particular employee at any time
during the calendar year, shall be the same method to be consistently used for the
remaining payroll period/s of the same calendar year.

How to Compute using Cumulative Average Method: ADICOMDE

Step 1: Add the amount of taxable regular and supplementary compensation.

Step 2. Divide the aggregate amount of compensation computed in step 1 by the number of
payroll period to which the amount relates;
Step 3. Compute the tax to be deducted and withheld on the cumulative average compensation
determined in Step No. (2) in accordance with the withholding tax table;
Step 4: Multiply the tax computed in Step No. (3) by the number of payroll period to which it
relates;
Step 5. Determine the excess, if any, of the amount of tax computed in Step No. (4) over the total
amount of tax already deducted and withheld from the beginning payroll period to the last payroll
period, including that withheld by the previous employer/s within the calendar year, if any. The
excess, as computed, shall be deducted and withheld from the compensation to be paid for the
last payroll period of the current calendar year.

B) Annual withholding tax method

When to apply:
(1) When the employer-employee relationship is terminated before end of the calendar
year; and
(2) when computing for the year-end adjustment, the employer shall determine the
amount to be withheld from the compensation on the last month of employment or in
December of the current calendar year.

How to compute using Annual Withholding Tax Method: DACDED

Step 1. Determine the taxable regular and supplementary compensation paid

to the employee for the entire calendar year;

Step 2. If the employee has previous employment/s within the year, add the amount of taxable
regular and supplementary compensation paid to the employee by the present employer doing
the annualized computation to the taxable compensation income received from previous
employer/s during the calendar year.
(a) When the employer-employee relationship is terminated before December – The
taxable regular and supplementary compensation income shall be the amount paid
since the beginning of the current calendar year to the termination of employment;
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
(b) Year-end adjustment- The taxable regular and supplementary compensation
income shall be the amount paid since the beginning of the current calendar year to
December;
(c) Taxable fringe benefits received by employees holding managerial or
supervisory positions shall be subject to a final fringe benefit tax. Hence, the same
shall not form part of the taxable supplementary compensation of managers and
supervisors subject to tax using the withholding tax tables.

Step 3. Compute the amount of tax on the amount arrived in Step 2, in accordance with the
applicable schedules, as follows:

Step 4. Determine the deficiency or excess, if any, of the tax computed in Step 3 over the
cumulative withholding tax already deducted and withheld since the beginning of the current
calendar year. The deficiency withholding tax (when the amount of tax computed in Step 3 is
greater than the amount of cumulative tax already deducted and withheld or when no tax has
been withheld from the beginning of the calendar year) shall be withheld from the last payment of
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
compensation for the calendar year. If the deficiency withholding tax is more than the amount of
the last compensation to be paid to an employee, the employer shall be liable to pay the amount
of tax which cannot be withheld from the employee’s last compensation for the year. The
obligation of the employee to the employer arising from the advances made by the employer of
the amount of the required tax is a matter of settlement between the employee and employer.
The excess withholding tax (when the amount of cumulative tax already deducted and
withheld is greater than the tax computed in Step 3) shall be credited or refunded to the
employee not later than January 25 of the following year. However, in case of termination
of employment before December, the refund shall be given to the employee at the
payment of the last compensation during the year. In return, the employer is entitled to
deduct the amount refunded to the employee/s from the remittable amount of taxes
withheld from compensation income for the current month in which the refund was made,
and in the succeeding months thereafter until the amount refunded by the employer is
fully repaid.
C) Computation of withholding tax on Fringe Benefit
(1) Final Withholding tax on Fringe Benefits paid to employees other than rank and file.
-There shall be imposed a final tax of thirty-five percent (35%) on the grossed-up
monetary value of fringe benefits granted or furnished by the employer to his
employees (except rank and file employees) unless the fringe benefits is required
by the nature of or necessary to the trade, business or 39 / 47 profession of the
employer, and when the fringe benefit is for the convenience and advantage of the
employer.
(2) Grossed-up monetary value of Fringe Benefits. – determined by dividing the
monetary value of the fringe benefit by sixty-five (65%). The grossed-up monetary
value of the fringe benefits furnished to the employees who are taxable under
subsection B of Section 25 of the Tax Code, as amended, shall be determined by
dividing the monetary value of the fringe benefit by the difference between one
hundred percent (100%) and the applicable rates of income tax prescribed on the
aforesaid sub-section of Section 25, to wit:
Subsection (B) – Twenty-five percent on income derived from sources within
the Philippines by a non-resident alien individual not engaged in trade or
business in the Philippines.

III. Filing of Withholding Tax Return

The filing of the withholding tax returns (BIR Form No. 1601EQ for creditable
withholding tax and Form Nos. 1602 for final tax on interest on bank deposits, 1603 for
final tax withheld on fringe benefits, and 1601FQ for all other final withholding taxes)
and payment of the taxes withheld at source shall be made not later than the last day
of the month following the close of quarter during which the withholding was made. The
quarter shall follow the calendar quarter.
REVENUE REGULATION 11-2018
Withholding Tax under the TRAIN Law
IV. Submission of Alphalists
The withholding tax returns filed by the withholding agents shall be accompanied by the
Quarterly Alphabetical List of Payees (QAP), reflecting the name of income payees,
Taxpayer Identification Number (TIN), the amount of income paid segregated per month
with total for the quarter (all income payments prescribed as subject to withholding tax
under the rules, whether actually subjected to withholding tax or not subjected due to
exemption), and the total amount of taxes withheld, if any.
V. Monthly remittance of taxes withheld
Withholding agents shall file BIR Monthly Remittance Form (BIF Form No. 0619E
and/or 0619F) every 10th day of the following month when the withholding tax is made,
regardless of the amount withheld. For withholding agents with zero remittance are still
required to use and file the same form.
In case of sale of shares of stock not traded through a local stock exchange and sale
of real property considered as capital asset, the filing gand payment of the tax due
thereon shall be made within 30 days after the sale or disposition using BIR Form No.
1707 and 1706, respectively.
VI. Annual Information Return and Annual Alphabetical List of Payees
The withholding agent is required to file with the concerned office of the LTS/RR/RDO
where the withholding agent is registered, the following:
1. Annual Information Return of Creditable Taxes Withheld (Expanded)/Income
Payments Exempt from Withholding Tax (BIR Form No. 1604E) including the
corresponding Annual Alphabetical List of Payees – on or before March 1 of the
following year in which payments were made.
2. Annual Information on Final Income Taxes Withheld (BIR Form 1604F) including
the corresponding Annual Alphabetical List of Payees – on or before January 31
of the following year in which payments were made.