BIR mulls measure involving top 5,000 individual taxpayers

MANILA, Philippines - The Bureau of Internal Revenue (BIR) is planning to issue a revenue regulation that would subject to creditable withholding tax the income payments made by the country’s top 5,000 individual taxpayers to their suppliers of goods and services.

BIR deputy commissioner Nelson Aspe said the move is part of the agency’s efforts to raise more revenues amid a difficult economic environment that has resulted to perennial collection shortfalls.

According to the draft revenue regulation, income payments made by the top 5,000 individual taxpayers to their local supplier of goods and services shall be covered by withholding tax.

Prior to this regulation, only income payments made by corporations to their suppliers of goods and services are subject to withholding taxes.

The draft regulation – which would still go through public hearings starting today – stipulates that suppliers of goods to the country’s top 5,000 corporations are subject to a withholding tax of one percent while suppliers of services are subject to a two percent withholding tax.

Aspe said these individual taxpayers are mostly sole proprietors engaged in businesses.

The draft regulation said that top 5,000 individual taxpayers shall include individual taxpayers engaged in trade or exercise of profession who have been determined and notified by the BIR as having satisfied certain conditions.

These include value added tax VAT payment of at least P1 million, annual income tax of at least P1 million, total percentage tax paid of at least P1 million, gross sales of at least P10 million, gross purchases of P5 million and total excise tax payments of least P100,000 for the preceding year.

The BIR is requiring top 5,000 individual taxpayers to submit a list of regular suppliers of goods and services to the Revenue District Officer having jurisdiction over their principal place of business on or before July 31 and Jan. 31 for the first and second semester of each year, respectively. 

The initial list, shall be submitted within 15 days from receipt of the notice as one of the Top 5,000 Individual Taxpayers, the draft regulation states.

The BIR, the government’s main revenue earner, is tasked to collect P850 billion this year.