What is Expanded Withholding Tax or EWT? [BIR Philippines]

expanded-withholding-tax

Negosentro.com | Expanded withholding tax on certain income payments and withholding tax on compensation are two of the common withholding taxes you should withheld and remit to the government, when applicable. In turn, the payees of these income payments can claim those taxes withheld as creditable against their income tax due for the corresponding quarters or year by attaching the applicable certificate of creditable tax withheld (BIR Form 2316) for taxes withheld on compensation and BIR Form 2307 for taxes withheld at source). In the following discussions, we shall tackle and aim to learn more about the expanded withholding tax in the Philippines.

What is expanded withholding tax?

Expanded Withholding Tax or EWT Tax is a kind of withholding tax which is prescribed on certain income payments and is creditable against the income tax due of the payee for the taxable quarter/year in which the particular income was earned.

What income payments are subject to Expanded Withholding Tax?

The following income payments are subject to Expanded Withholding Tax:

1. Professional fees / talent fees for services rendered by the following:

  • Those individually engaged in the practice of profession or callings such as lawyers,certified public accountants, doctors of medicine, architects, engineers and all other professionals who have undergone licensure examinations regulated by the Professional Regulations Commission, Supreme Court, etc.
  • Professional entertainers such as but not limited to actors and actresses, singers, lyricist, composers and emcees
  • Professional athletes including basketball players, pelotaris and jockeys
  • Directors and producers involved in movies, stage, radio, television and musical productions
  • Insurance agents and insurance adjusters
  • Management and technical consultants
  • Bookkeeping agents and agencies
  • Other recipient of talent fees
  • Fees of directors who are not employees of the company paying such fees whose duties are confined to attendance at and participation in the meetings of the Board of Directors

2. Professional fees, talent fees, etc for services of taxable juridical persons

3.  Rentals:

  • Rental of real property used in business
  • Rental of personal properties in excess of P 10,000 annually
  • Rental of poles, satellites and transmission facilities
  • Rental of billboards

4. Cinematographic film rentals and other payments

5. Income payments to certain contractors

  • General engineering contractors
  • General building contractors
  • Specialty contractors
  • Other contractors such as transportation contractors, janitorial, security, messengerial, advertising, labor recruiting agencies, computer programmers, etc.
  • Income distribution to the beneficiaries of estates and trusts

7. Gross commission or service fees of customs, insurance, stock, real estate, immigration and commercial brokers and fees of agents of professional entertainers

8. Income payments to partners of general professional partnerships

9. Payments made to medical practitioners

10. Gross selling price or total amount of consideration or its equivalent paid to the seller/owner for the sale, exchange or transfer of real property classified as ordinary asset

11. Additional income payments to government personnel from importers, shipping and airline companies or their agents

12. Certain income payments made by credit card companies

13) Income payments made by the top 20,000 private corporations to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding

14. Income payments by government offices on their purchase of goods and services, from local/resident suppliers other than those covered by other rates of withholding

15. Commission, rebates, discounts and other similar considerations paid/granted to independent and exclusive distributors, medical/technical and sales representatives and marketing agencies and sub-agents of multi level marketing companies..

16. Tolling fees paid to refineries

17. Payments made by pre-need companies to funeral parlors

18. Payments made to embalmers by funeral parlors

19. Income payments made to suppliers of agricultural products (suspension not yet lifted)

20. Income payments on purchases of mineral, mineral products and quarry resources

21. On gross amount of refund given by MERALCO to customers with active contracts as classified by MERALCO;

22. Interest income on the refund paid through direct payment or application against customers’ billing by other eletrict Distribution Utilities in accordance with the rules embodied in ERC Resolution No. 8 series of 2008 dated June 4,  2008 governing the refund of meter deposits which was approved and adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for Residential Electricity Consumers and Article 3.4.2 of DSOAR exempting all electricity consumers, whether residential or non-residential from the payment of meter deposit.

23 Income payments made by the top 5,000 individual taxpayers to their purchase of goods and services from their local/resident suppliers other than those covered by other rates of withholding

24. Income payments made by political parties and candidates of local and national elections of all their campaign expenditures, and income payments made by individuals or juridical persons for their purchases of goods and services intended to be given as campaign contribution to political parties and candidates

Who are required to file the expanded withholding tax (EWT Tax) returns?

The following individuals and entities are required to file the BIR Form No. 1601-E – Monthly Remittance Return of Income Taxes Withheld (Expanded) and BIR Form No. 1604-E  -Annual Information Return of Creditable Income Taxes Withheld (Expanded):

Every registered withholding agent on Expanded Withholding Tax, which may include, but not limited to the following:

1) Individual engaged in business or practice of profession

2) Non-individual (corporation, association, partnership) whether engaged in business or not.

3) Government agencies and instrumentalities (e.g., National Government Agencies, Government-Owned or Controlled Corporations, Local Government Units, etc.)

What are the procedures of filing the expanded withholding tax returns?

For the steps and procedures in computing and filing the expanded withholding tax payable and returns, please read this:

Sample Computation of Expanded Withholding Tax

If your company is paying a gross monthly rental of P50,000 for the office space you rented, the monthly tax that should be withheld and remitted to the BIR by you is computed as follows:

EWT= Income payments x tax rate
EWT= P50,000 x 5%
EWT=P2,500

Explanation: The nature of income payment you paid belongs to rentals, which include real/personal properties, poles, satellites & transmission, facilities and billboards. This type of income payment has a tax rate of 5%. Hence, the computation of tax to be withheld is as above.

TOP DOWNLOADABLE BIR FORMS FOR YOUR SMALL BUSINESS ENTERPRISE [eBIR Forms]:

BIR FORM 2551q Quarterly Percentage Tax Return

Payment Form
0611-A Payment Form Covered by a Letter Notice
0613 Payment Form Under Tax Compliance Verification Drive/Tax Mapping
0619-E Monthly Remittance Form for Creditable Income Taxes Withheld (Expanded)
0619-F Monthly Remittance Form for Final Income Taxes Withheld
0620 Monthly Remittance Form of Tax Withheld on the Amount Withdrawn from the Decedent’s Deposit Account
1600 Monthly Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld (Under RAs 1051, 7649, 8241, 8424 and 9337)
Remittance Return of Percentage Tax on Winnings and Prizes Withheld by Race Track Operators
Monthly Remittance Return of Income Taxes Withheld on Compensation
Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded)
Quarterly Remittance Return of Final Income Taxes Withheld
Quarterly Remittance Return of Final Income Taxes Withheld On Interest Paid on Deposits and Yield on Deposit Substitutes/Trusts/Etc.
1603Q Quarterly Remittance Return of Final Income Taxes Withheld on Fringe Benefits Paid to Employees other than Rank and File
Annual Information Return of Income Taxes Withheld on Compensation
1604-F Annual Information Return of Income Payments Subjected to Final Withholding Taxes
Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Tax
Withholding Tax Remittance Return For Onerous Transfer of Real Property Other Than Capital Asset (Including Taxable and Exempt)
1621 Quarterly Remittance Return of Tax Withheld on the Amount Withdrawn from Decedent’s Deposit Account
1700 Annual Income Tax Return For Individuals Earning Purely Compensation Income (Including Non-Business/Non-Profession Related Income)
1701 Annual Income Tax Return For Individuals (including MIXED Income Earner), Estates and Trusts
1701A Annual Income Tax Return For Individuals Earning Income PURELY from Business/Profession (Those under the graduated income tax rates with OSD as mode of deduction OR those who opted to avail of the 8% flat income tax rate)
Quarterly Income Tax Return For Self-Employed Individuals, Estates and Trusts
Annual Income Tax Return For Corporation, Partnership and Other Non-Individual Taxpayer Subject Only to REGULAR Income Tax Rate
1702-EX Annual Income Tax Return For Corporation, Partnership and Other Non-Individual Taxpayers EXEMPT Under the Tax Code, as Amended, [Sec. 30 and those exempted in Sec. 27(C)] and Other Special Laws, with NO Other Taxable Income
1702-MX Annual Income Tax Return For Corporation, Partnership and Other Non-Individual with MIXED Income Subject to Multiple Income Tax Rates or with Income Subject to SPECIAL/PREFERENTIAL RATE
1702Q Quarterly Income Tax Return for Corporations, Partnerships and Other Non-Individual Taxpayers
1704 Improperly Accumulated Earnings Tax Return For Corporations
1706 Capital Gains Tax Return for Onerous Transfer of Real Property Classified as Capital Asset (both Taxable and Exempt)
1707 Capital Gains Tax Return for Onerous Transfer of Shares of Stocks Not Traded Through the Local Stock Exchange
1707-A Annual Capital Gains Tax Return for Onerous Transfer of Shares of Stock Not Traded Through the Local Stock Exchange
1800 Donor’s Tax Return
1801 Estate Tax Return
Application for Authority to Use Computerized Accounting System or Components thereof/Loose-Leaf Books of Accounts
Application for Registration For Self-Employed (Single Proprietor/Professional), Mixed Income Individuals, Non-Resident Alien Engaged in Trade/Business, Estates and Trusts
Application for Registration For Individuals Earning Purely Compensation Income (Local and Alien Employee)
Application for Registration For Corporations, Partnerships (Taxable/Non-Taxable), Including GAIs, LGUs, Cooperatives and Associations
Application for Registration For One-Time Taxpayer and Persons Registering under E.O. 98 (Securing a TIN to be able to transact with any Government Office)
Application for Registration Information Update/Correction/Cancellation
Application for Authority to Print Receipts and Invoices
Application for Permit to Use Cash Register Machine/Point-of-Sale Machine
Documentary Stamp Tax Declaration/Return
Documentary Stamp Tax Declaration/Return (One-Time Transactions)
Application for Abatement or Cancellation of Tax, Penalties and/or Interest Under Rev. Reg. No. ______
Excise Tax Return for Alcohol Products
Excise Tax Return for Automobiles and Non-Essential Goods
2200-C Excise Tax Return for Cosmetic Procedures
Excise Tax Return for Mineral Products
Excise Tax Return for Petroleum Products
2200-S Excise Tax Return for Sweetened Beverages
Excise Tax Return for Tobacco Products
Certificate of Income Payment Not Subject to Withholding Tax (Excluding Compensation Income)
Certificate of Final Tax Withheld At Source
Certificate of Creditable Tax Withheld At Source
Certificate of Compensation Payment/Tax Withheld For Compensation Payment With or Without Tax Withheld
2550M Monthly Value-Added Tax Declaration
2550Q Quarterly Value-Added Tax Return
2551Q Quarterly Percentage Tax Return
2552 Percentage Tax Return for Transactions Involving Shares of Stock Listed and Traded Through the Local Stock Exchange or Through Initial and/or Secondary Public Offering
2553 Return of Percentage Tax Payable Under Special Laws

Source: BIR

If you are a foreigner and intend to invest and setup your company in the Philippines, checkout a number of resources from the Bureau of Investments to the Philippine Retiremement Authority.

Disclaimer:

New and subsequent BIR rulings, issuances and or laws may render the whole or part of the article obsolete or inaccurate. Furthermore, there may also be other relevant information that have been missed to include in this article. For more information, please visit the Bureau of Internal Revenue (BIR) website.

Source: BIR Income Tax information on withholding tax


If you’re a US based company and happen to find this article, checkout this post on “Tax Tips for New Small Business Owners.”

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