The word “Top Withholding Agent” is thrown around pretty often in BIR reports and articles. As defined by the Philippine Bureau of Internal Revenue, “Top Withholding Agents” are the largest taxpayers. Other taxpayers considered Top Withholding Agents are taxpayers classified under medium taxpayers, and also those who are considered Top Withholding Agents under the Taxpayer Account Management Programs. What does this mean for your business? Let’s find out more below:
What are the Subdivision of Top Withholding Agents?
Top Withholding Agents are further subdivided into the Top 20,000 private corporations, the Top 5,000 individual taxpayers, Top 10,000 Private Corporations, and Large Taxpayers. Listed below are the characteristics of a taxpayer or corporate entity that qualifies under each category.
Large Taxpayers:
– 1,000,000 pesos Annual Excise Tax
– 1,000,000 pesos Annual Withholding Tax
– 1,000,000 pesos Annual Income Tax
– 1,000,000 pesos Documentary Stamp Tax
– 250,000 pesos Value Added Tax per quarter
– 100,000 pesos Percentage Tax per quarter
Top 5,000 Individual Taxpayers:
– 10,000,000 pesos Gross Purchases
– 10,000,000 Gross Sales
– 200,000 Annual Income Tax
– 100,000 Annual Excise Tax
– 100,000 Annual Percentage Tax
– 100,000 Value Added Tax for the Year
Top 10,000 Private Corporations:
– Large Taxpayers
– 10,000,000 pesos Gross Sales
– 5,000,000 pesos Gross Purchases
– 200,000 pesos Annual Income Tax
– 100,000 pesos Annual Percentage Tax
– 100,000 pesos Value Added Tax for the Year
Top 20,000 Private Corporations:
– Large Taxpayers
– Top 5,000 Private Corporations
– Top 10,000 Private Corporations
– 10,000,000 Gross Sales
– 5,000,000 pesos Gross Purchases
– 200,000 pesos Annual Income Tax
– 100,000 pesos Annual Percentage Tax
– 100,000 pesos Value Added Tax for the Year
– 100,000 pesos Annual Excise Tax
What Does This Mean For Your Company?
If you happen to find your business under the Top Withholding Agents list, it means that your company fits the description of any of the particulars as mentioned above. Noteworthy, being a Top Withholding Agent does not mean you have to pay more in taxes.
It only means that you have more responsibility as you will have to withhold 1% for goods or 2% for services from all your purchases. These withheld taxes should then be remitted to the BIR. Purchases only cover items and services bought from a supplier for at least 6 times, no matter the amount. As for single purchases that amount to 10,000 pesos or more, top withholding agents are mandated to withhold the 1% or 2% regardless of whether the purchase was made to regular suppliers.
Since these taxes are held by your business as the purchasing party, the responsibility of remittance and turnover to the Bureau of Internal Revenue falls in your hands. Any failure to remit these taxes will be reflected on your company. As a result, the BIR may sanction your business by imposing certain penalties. The worst-case scenario is a thorough audit and investigation under their Oplan Kandado Program.
What You Can Do For Assured Tax Compliance?
In order to properly track the amount of withholding tax, your company must keep a good record of all transactions and purchases. Moreover, official receipts and invoices need to be secured to provide evidence for these purchases, should the BIR request them.
These are tasks that you and your employees can undertake, albeit challenging and time-consuming. However, if you have resources to spare, do make sure to look into in-house or outsourced professional bookkeeping and accounting services, as they will take care of this matter for you. Their assistance can help mitigate a complex and time consuming BIR audit.
Remember, it is better to invest in quality financial services from the get-go than face the burdensome penalties incurred due to faulty financial tracking and management. Besides, it is your responsibility as a citizen to pay the correct amount. This will also help your business secure the proper tax clearances.
If you need assistance in these aspects, our team of Certified Public Accountants is ready to come to your rescue. Aside from bookkeeping and accounting services, we offer assistance with your taxes to ensure your business is compliant and pays dues on time. Get in touch with us today for a free 30-minute consultation.
