RMC No. 36-2021 — Prescribes changes and guidelines on the shift from final to a creditable system on the value-added tax (VAT) withheld on sales to government or any of its political subdivisions, instrumentalities or agencies, including Government-Owned or –Controlled Corporations (GOCCs)

HUREAU OF INTERNAL REVENUE

tatytt REPUBLIC OF THE PHILIPPINES 10:25 A.M.U

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE GUUA MAR 0 5 2021 AM

RECORNS MGT.DIVISION

D

January 15, 2021

REVENUE MEMORANDUM CIRCULAR NO.3( - 2D2)

SUBJECT: Shift from Final to a Creditable System on the Value-Added Tax (VAT) Withheld

on Sales to Government or Any of Its Political Subdivisions, Instrumentalities or Agencies, Including Government-Owned or --Controlled Corporations (GOCCs)

TO : All Internal Revenue Officers and Others Concerned

This is in line with Section 37 of Republic Act No. 10963, otherwise known as the "Tax Reform for Acceleration or Inclusion" or the "TRAIN Law," amending certain provisions of Section l 14 of the Tax Code of 1997, as amended, and as implemented under Section 4-114-2 of Revenue Regulations No 13-2018, which reads:

"SEC.4-114-2. Withholding of VAT on Government Money Payments and Payments to Non-Residents.

(a) Withholding of Value-added Tax. - The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or purchase of goods and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax imposed -controlled corporations (GOCCs) shall, before making payment on account of each

in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at final to a creditable system: xxx ' the rate of five percent (5%) of the gross payment thereof: provided, that beginning January 1, 2021, the VAT withholding system under this subsection shall shift from

In this regard, the following changes and guidelines are prescribed effective January l, 2021 :

A. Monthly and Quarterly VAT Returns (BIR Form Nos. 2550M and 2550Q). - The following changes/adjustments shall be effected to the following forms, in relation to VAT withholding, until

a new version of the forms have been developed and prescribed for use:

FORM BIR NO. AFFECTED SCHEDULE LINE/ DESCRIPTION REMARKS

February 2550M 2007) 20B 23C Input tax on sale to Govt. closed to expense (Sch. 4) VAT withheld on Sales to Not to be filled out/To be Payment and Filing System (eFPS) deactivated from the Electronic Where the creditable VAT

Government (Sch. 8) withheld will be reflected Schedule 4 Sale to Government Input Tax Attributable to Not to be deactivated from the eFPS filledout/To be

Schedule 8 Government VAT withheld on Sales to VAT withheld will be reflected Where the details of the creditable

February FORM 2550Q 2007) NO. BIR D SCHEDULE AFFECTED Schedule 4 Schedule 8 LINE/ 23B 26D Input tax on sale to Govt. closed to expense (Sch. 4) VAT withheld on Sales to Government (Sch. 8) Input Tax Attributable to Sale to Government VAT withheld on Sales to Government DESCRIPTION Not to be filled out/To be Not to be filled out/To be deactivated from the eFPS deactivated from the eFPS Where the creditable withheld will be reflected Where the details of the creditable V AT withheld will be reflected REMARKS VAT

B. Filing and Payment. -- The government or any of its political subdivisions, instrumentalities or

agencies, including GOCCs who are required to withhold creditable VAT shall use the "Monthly Remittance Return of Value-Added Tax Withheld' (BIR Form No. 1600-VT) for filing and remittance of the amount withheld. However, for those using the eFPS, they shall still use BIR Form No 1600 due to unavailability of BIR Form No. 1600-VT.

C. Proof of Withholding. - The government or any of its political subdivisions, instrumentalities or

agencies, including GOCCs who are required to withhold creditable V AT shall issue the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307) using Alphanumeric Tax Code (ATC) No. WV010 for purchases of goods or WV020 for purchases of services. Thus, the Certificate of Final Tax Withheld at Source (BIR Form No. 2306) shall no longer be issued for this purpose

The BIR Form No. 2307 shall be used as proof by VAT taxpayers in claiming for VAT credit in their monthly and quarterly VAT declarations. Erroneous use of the same (i.e.; reflected as tax credit in the quarterly and annual Income Tax Return) shall result in disallowance of the withheld amount and forfeiture of the same in favor of the Government.

All BIR rulings or issuances inconsistent herewith, are hereby considered amended, modified or revoked accordingly.

All concerned are hereby are enjoined to be guided accordingly and give this Circular as wide a publicity as possible.

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CAESAR R. DULAY Commissioner of Internal Revenue BUREAU OF INTERNAL REVENUE NnTYTyY MAR O 5 2021 10:23 A.u.U H'k 041143

RECORDS MGT.DKISiON UJ