This after the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) worked out a compromise agreement with representatives of the professional entertainment and sports industries.
The new tax scheme raised the annual gross income threshold for professional athletes and entertainers to P720,000, which means that only those falling under this income bracket will be slapped the 20 percent withholding tax.
Those in the industry earning less than P720,000 a year, will continue paying the 10 percent withholding tax on their annual gross income.
Under BIR Revised Regulations 6-2001, the income threshold that will be charged or imposed a 20 percent withholding tax, was increased from P140,000 to P720,000 annually.
Moreover, government has set additional exemptions, of P32,000 for married couples with four dependents while those who are self-employed will enjoy additional exemptions of P72,000.
"I think that government has addressed their issues and clamor and the taxes set are reasonable," Finance Secretary Jose Isidro Camacho said.
Earlier, government previously agreed to review its move to raise the withholding tax on professional entertainers, athletes, and talent promotion companies after a series of dialogues with representatives of the affected sectors.
Industry representatives pointed out that the BIR move to increase the withholding tax to 20 percent from 10 percent will be burdensome to "talents" such as make-up artists, production assistants, writers, executive producers and other personnel who unlike the so-called "professional talents" such as actors, singers, directors and athletes, do not earn more than P150,000 to P180,000 a year.
The BIR move was intended to plug tax leakages that are committed mostly by so-called professional talents such as actors, singers, athletes and other entertainers with big incomes.
BIR sources said there are several loopholes that could be used by top-rated entertainers and athletes, for instance, to bring down their taxes and, in the process deprive government of much-needed revenue.
To make the taxes on the industry people more equitable, the BIR and DOF reclassified the different talents and their corresponding income brackets that will be the basis for the imposition of the withholding tax.
Camacho said the new withholding tax should not be a burden to the sector involved because it simply entails advancing the amount they will be paying for their annual taxes. Collecting these on a regular basis will allow them to pay in smaller amounts or increments instead of "lumping" the withheld tax for the entire year.
The BIR approved last July 31, Revenue Regulations 6-2001 which amended the withholding tax on so-called professional entertainers and similar or related professions.