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Top Corporations and Top Individual Tax Taxpayers

Top 20,000 Corporations & Top 5,000 Individual Taxpayers by Atty. Roy N. Relato

 

Is your company classified as a large taxpayer by the Bureau of Internal Revenue (BIR)? Does it belong to the BIR’s list of top 5,000 or top 10,000 private corporations?

If your company falls under any of the foregoing classifications of the BIR, then it is automatically classified as a top 20,000 private corporation pursuant to the recently issued Revenue Regulations (RR) No. 6-2009.

Under RR 6-2009, income payments made by top 20,000 private corporations to their local/resident supplier of goods and local/resident supplier of services, including non-resident aliens engaged in trade or business in the Philippines, are subject to creditable withholding tax (CWT) at the following rates:

    Supplier of goods     -     1 percent
    Supplier of services     -     2 percent

However, for purchases involving agricultural products in their original state, the 1 percent CWT shall only be applied to purchases in excess of the cumulative amount of P300,000 within the same taxable year. Agricultural products, in their original state, only include corn, coconut, copra, palay, rice cassava, sugar cane, coffee, fruits, vegetables, marine food products, poultry and livestock.

In addition to corporate taxpayers who are classified as large taxpayers or who belong to the list of top 5,000 or top 10,000 private corporations, RR 6-2009 also classifies the following corporate taxpayers as top 20,000 private corporations provided that any of the following criteria is present:

a.    Value-added tax (VAT) payment or payable, whichever is higher, of at least P100,000 for the preceding year;
b.    Annual income tax due of at least P200,000 for the preceding year;
c.    Total percentage tax paid of at least P100,000 for the preceding year;
d.    Gross sales of P10,000,000 and above for the preceding year; and
e.    Total excise tax payment of at least P100,000 for the preceding year.

A corporation who has qualified as a top 20,000 corporation shall be notified in writing by the BIR.

The regulation also adds a new classification for individual taxpayers. Under RR 6-2009, individual taxpayers classified as top 5,000 individual taxpayers are required to withhold 1 percent CWT on income payments to their local/resident supplier of goods and 2 percent CWT on income payments
local/resident supplier of services.

Similarly, purchases of agricultural products in their original state shall only be subject to 1percent CWT if the total purchases for the same year exceeds P300,000.

Under RR 6-2009, top 5,000 individual taxpayers include all individual taxpayers (resident citizen, non-resident citizen, resident alien, and non-resident alien) engaged in trade or business or exercise of profession who have satisfied any of the following criteria:

a.    VAT payment or payable, whichever is higher, of at least P100,000 for the preceding year;
b.    Annual income tax due of at least P200,000 for the preceding year;
c.    Total percentage tax paid of at least P100,000 for the preceding year;
d.    Gross sales of P10,000,000 and above for the preceding year;
e.    Total gross purchases of P5,000,000 and above for the preceding year; and
f.    Total excise tax payment of at least P100,000 for the preceding year.

For resident citizens with multiple lines of business, the amount of tax payments, gross sales and gross purchases shall be determined by considering all his lines of business. On the other hand, only those sales and purchases derived by non-resident citizen, resident alien, and non-resident alien in the Philippines shall be included in determining the amount of tax payments, gross sales and gross pur chases of these individual taxpayers.

The regulation defined a “local/resident supplier of goods” as a supplier from whom a top 5,000 individual taxpayer regularly makes purchase of goods and does not include casual or single purchases. However, a single purchase of goods other than agricultural products, amounting to P10,000 or more, shall be subject to 1 percent CWT. Purchases of goods do not include purchases of real property.

On the other hand, “regular suppliers” refer to suppliers who are engaged in business or exercise of profession or calling with whom the individual taxpayer has transacted at least six transactions, regardless of the amount per transaction, either in the previous or current year.

An individual taxpayer who has been determined as a top 5,000 individual taxpayer shall be notified in writing by the BIR and shall cease to be as such when he files a notice of closure or cessation of all business lines or fails to meet the above criteria and a notice of deletion is issued to him by the BIR.

Finally, top 5,000 individual taxpayers are required to file the tax returns and remit the taxes withheld through the BIR’s Electronic Filing Payment and System (EFPS). Moreover, these taxpayers shall also submit a list of regular suppliers of goods and/or services to the Revenue District Officer having jurisdiction over the principal place of business on or before July 31 and January 31 for the first and second semester of each year, respectively, in diskette or CD format or through e-submission.

This article is not intended to be a substitute for professional advice.  For comments and inquiries, you may e-mail the author at Roy.Relato@ph.gt.com.  For other tax concerns, please check out our other tax services.