MANILA, Philippines - The Bureau of Internal Revenue (BIR) has issued a circular clarifying the withholding tax rates on income and dividend payments received by Filipinos and foreigners.
Revenue Memorandum Circular 73-2014 states that Filipinos who receive dividends from companies is subject to final withholding tax of 10 percent unless it can show that the actual equity investor is a domestic corporation.
A foreigner, on the other hand, will be assessed a final withholding tax rate of 30 percent unless it is satisfactorily shown that the investor is a resident alien, non-resident alien engaged or not engaged in trade or business in the Philippines or resident foreign corporation.
The issuance of the circular followed the order issued by the Supreme Court stopping the BIR and the Securities and Exchange Commission from enforcing regulations requiring the disclosure of vital information of clients of the banking and securities industry.
In a petition lodged before the Supreme Court, the Bankers Association of the Philippines, the Philippine Stock Exchange and the Fund Managers Association of the Philippines sought to nullify BIR Revenue Regulation 01-2014, which they deemed was violative of the Bank Secrecy Law.
Under this ruling, all withholding agents are required to submit an “alphalist” of payees on income payments subject to creditable and final withholding taxes and prohibit the lumping into a single amount and account of various income payments and taxes withheld.
In addition, brokers and dealers are required to disclose sensitive information of investors without the necessary safeguards in place to ensure that such information would be treated with utmost confidentiality.