RMC No. 10-2018 — Clarifies the time of withholding and remittance of taxes withheld by Withholding Agents including National Government Agencies and Instrumentalities, Local Government Units and Government-Owned and-Controlled Corporations provided under Sec. 4 of RR No. 12-2001 Digest | Full Text

REPUBLIC OF THE PHILIPPINES BIIREAU OT N.TTEBNAI BE\IS{I'E DEPARTMENT OF FINANCE RECOBDS N,TET, DTYISION BUREAU OF INTERNAL REVENUE 4:4o u, P. t iAN 3 z\rful,.,tru7r REcEYt'- o .lanuar\,31.2018 REVENUE MEMORANDUM cTRCULAR No. t0- A0l g STIBJECT: Clarif ing the Time of Withholding and Remittance of Taxes Withheld bv Withholding Agents including National Government Agencies and Instrumentalities, Local Government Units and Government Owned and Controlled Corporations provided under Sec. 4 of Revenue Regulation (RR) No. 12-2001. TO AII Internal Revenue Officers and Others Concerned This circular is issued to clarify the time of withholding and remittance of taxes witliheld b1, withholding agents including national government agencies and instrumentaiities. local government r-rnits and govemnent owned and controlled corporations in vier.r'of the conflict between the pror.,ision of Section 2.57.4 of BIR Revenue Regulation (RR) No. 2-98 as amer.rded by Section 4 of RR 12-2001 vis-a-vis the guidelines and procedure provided under the Government Accounting Manual (GAM). Sectiot.t 4 of RR No. 12-2001, amending Section 2.57.4 of RR No. 2-98 plovides the lrrllou ing: 'SECTION -1. Trrnc of \\'ithholcllns. - Scction l.i7 4 of RR I 98. is lrcrchr' ,rnrcnclccl to rcrcl rrs iollon's: Scction 2.57.,1 Tirnc of l'ithhoicling. - Thc obliea.tion ol rhc pirl,or to clccluct rincl u'itl'rholcl thc tax unclcr Scction ).57 ol thcsc Regularions ariscs at the timc an income p2ryment is paid or payahle , or their incomc payment is accrucd or rccorclcd as an cxpcnsc or assct, lvhichevcr is applicablc, in thc payor's bool<s, whichevcr comes [irst. Thc tcnr "pa1,;rblc" rc[crs to thc datc thc obligarion beconrcs cl:c. cicmanclirblc or lcgrrlly' cnlorccaltlc. Providcd, htrn'cvcr. rhat u'hcrc incrln'rc is not vc[ paicl or prvablc hur thc s.urc has bccn lccorclcc] as rn cxpclrsc or assct, u'hichcvcr is applicablc, in thc pa1'or's bool<s. thc oblieation to x'itl'rholcl shall arisc in thc last rronrh of return pcr"iocl in ri'hiclr thc srrmc is claimcd as;1n cxpcnsc ()r irrrorti-cd for tzrx plrrposcs. x x x" On the other hand. the GAM n'hich prescribes unilorm accounting procedures in sovenrmenl llnar-icial procedures provides the f-ollouing: /, \Vl.'lr'

./- "During thc construction pe riod, all cxpe nse s incurrcd in rclation to the - construction of thc PPE shal1 be ral<en up in tl-re books as Con.s[ructron in Progress.(CIP) u,ith thc appropriatc assct classificarion. As soon as thc con.struction is completed, thc "Construction in Progrcss" ;rccount shall bc rcclassifiecl to the llroper assct account. Likelr.isc, all expcnscs such a.s ir-itcrcst, liccnsc fecs, ctc., dr-rring thc constnlction pcriod .sl-rail bc capitalizecl." .Tl.re seeming conflict between the BIR Revenue Regulation and the GAM occurred as a resnlt of the illustrative example of the accounting entries in the GAM itsell'whereby"-DLre to BIR" accounts were recognized only'upon payment o['the accounts pa1'able to the incorne pa],ee. According11,. and pursuant to the power o1-the Conlrnissioner of Internal Revenue to intelprel tax laws and to decide tax cases provided under Section 4 of the 1997 National internal Revenue Code. as arnended. it is hereby clarified that the obligation to withhold arises at the time an income pa1,'n-rent is paid or payable. or the income pa,vment is accrued or recorded as exper.lse or asset. u,hichever is applicable. in the payor's books. whichever coruesfirst. Stated otherwise, the obligcttion to tt,ilhhold laxes olreac{1l ari,se,s v,hen an expetlse or u,y,yel is ulreudl, recorcled v'helher or not lhe sume ha.s' been puid, pur,s'uanl to RR No. 12-2001. In the case of govemment projects. the obligation to withhold arises at the time that the goverrrrent agency books construction of PPE as Construction in Progress with the appropliate assel classification since what RR No. 12-2001 mandates is "wirichever comes first". All internal revenue offlcers and others concerned are strictly enjoined to implernenl the provisiorrs of this Circular. ,ztr*,s" CAESAR R. DULAY v z y ('orrrrn issioncr o l' I ryprn3,] [e;e1 u9 t /, 6 'ffi'*iffiiHffi JAN 31 zot8 !/,f,"^ RECEI\IY Ul