Member, RSM International

Volume 2 Series 3

Tax View &

Compliance

Revenue Regulation No.: 14-2008
EXPANDING THE COVERAGEOF WITHHOLDING TAX AGENTS FROM THE TOP
10,000 PRIVATE CORPORATIONS TO TOP 20,000 PRIVATE CORPORATIONS
The Bureau of Internal Revenue issued Revenue
Regulation 14-2008 to amend the provision of
Section 2.57.2(M) of Revenue Regulation 2-98. This
new regulation expands the coverage of
withholding agents required to withhold from
their local/resident supplier of goods and
services, including non-resident alien engaged in
trade or business in the Philippines, from the Top
10,000 private corporations to Top 20,000 private
corporation. For the supplier of goods the
withholding agent is required to withhold 1% and
2% from the supplier of services.
To be included in Top twenty thousand (20,000)
private corporations, BIR will determine if the
taxpayer will satisfy any of the following criteria:
a. Classified and duly notified by the
Commissioner as a large taxpayer under
Revenue Regulation No. 1-98 as amended,
or belonging to top five thousand (5,000)
private corporations under RR 12-94, or
top ten thousand (10,000) private
corporations under RR 17-2003, unless
previously de-classified as such or had
already ceased business operations
(automatic inclusion).
b. Any taxpayer with the net VAT paid or
payable for the preceding year of at least
P 100,000;
c. Any taxpayer with annual income tax paid
or payable for the preceding year of at
least P 200,000;
d. Any taxpayer with percentage taxes for
the preceding year of at least P 100,000;
e. Any taxpayer whose gross sales for the
preceding year is over P 5,000,000;
f. Any taxpayer whose gross purchase for
the preceding year is over P 5,000,000.
The term “goods” pertains to tangible personal
property. It does not include intangible personal
property, as well as real property.
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The term local/resident supplier of goods and
services pertains to supplier from whom any of
the top 20,000 private corporations, as
determined by the Commissioner, regularly makes
its purchase of goods. As a rule, this term does
not include a casual purchase of goods, that is,
purchase made from non-regular supplier and
oftentimes involving single purchase. However a
single purchase amounting to P 10,000 or more
shall be subject to withholding tax. The term
regular supplier refers to suppliers who are
engaged in business or exercise of
profession/calling with whom the taxpayer-buyer
has transacted at least six (6) transactions,
regardless of amount per transaction, either in
the previous year or current year.
The taxpayer will be notified in writing by the
Commissioner once it has been determined to
qualify for Top 20,000 private corporations. The
corporation shall remain a withholding agent
unless the Commissioner notifies it in writing that
it shall cease to be one. The following are some of
the reasons that a taxpayer shall automatically
cease to be a withholding agent, and therefore no
prior written notice is required, to wit:
a. closure/cessation of business/dissolution
(for taxpayers with notice of dissolution
given to the BIR)
b. merger/consolidation (for dissolved or
absorbed corporation)
c. any form of business combination
wherein by operation of law a corporate
taxpayer loses its juridical personality
The withholding agent is required to submit on a
semestral basis a list of its regular supplier of
goods and services to the Large Taxpayer
Assistance Division/Large Taxpayers District
Office in the case of large taxpayer duly notified
as such pursuant to RR 1-98, as amended, or
Revenue District Office (RDO) having jurisdiction
over the withholding agent’s principal place of
business on or before July 31 and January 31 of
each year.
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Revenue Regulation No.: 16-2008 - OPTIONAL STANDARD DEDUCTIONS
Revenue Regulation 16-2008 was issued by the
Bureau of Internal Revenue to implement the
provision of Section 34(L) of the Tax Code of
1997 as amended by Section 3 of Republic Act
9504, dealing on the Optional Standard
Deductions (OSD) as allowed claim in lieu of
itemized deductions (i.e items of ordinary and
necessary expenses allowed under Section
34(A) to (J) and (M), Section 37, other special
laws, if applicable), by the following taxpayers:
1. Individuals
i. Resident Citizen
ii. Non-Resident Citizen
iii. Resident Alien
iv. Taxable estates and trusts
2. Corporations
i. Domestic corporation
ii. Resident foreign corporation
In determining the OSD, we need to look into
consideration the type of taxpayer availing OSD.
For individual taxpayers, the OSD allowed shall
be a maximum of forty percent (40%) of gross
sales or gross receipts during the taxable year
depending on the accounting method used for
his income and expenses. Cost of Sales and Cost
of Service are not allowed to be deducted for
the purpose of determining the basis of OSD
pursuant to the provision of Section 3 of RA
9504 which is specific as to the basis thereof
which states that for individuals, the basis of
the 40% OSD shall be the “gross sales” or gross
receipts and not the “gross income”.
For corporate taxpayers subject to tax under
Section 27(A) and 28(A)(1) of the Code, as
amended, the OSD allowed shall be in an amount
not exceeding forty percent (40%) of their
gross income.
Gross Income shall mean gross sales less sales
returns, discounts and allowances and cost of
goods sold. Gross sales shall include only sales
contributory to income taxable under Section
27(A) of the Code. Cost of goods sold shall
include the purchase price of cost to produce
the merchandise and all expenses directly
Volume 2 Series 3
incurred in bringing them to their present
location and use. Computation of cost of goods
sold depends on the nature of business of the
corporate taxpayers.
The gross income under Section 32(A) of the
Code, as amended, which are required to be
declared in the income tax return of the
taxpayer for the taxable year are part of the
gross income against which the OSD may be
deducted in arriving at taxable income. Passive
income that is subject to final tax at source
shall not form part of gross income.
As for the General Professional Partnership,
since the net income of the partnership, for the
purpose of computing the distributive share of
the partners, is computed in the same manner
as a corporation they may claim either itemized
deductions or it may opt to avail OSD. The net
income determined by either claiming itemized
deduction or OSD from the GPPs gross income
shall be the distributable net income from which
the share of each partner is to be determined.
Each partner shall report as gross income his
distributive share, actually or constructively
received, in the net income of the partnership.
For the Partners of GPPs, they have the option
either to claim itemized deductions or OSD since
their share in the net income of the GPP is
considered gross income in the hands of the
partner regardless of the method the GPP
computes its net income.
When a taxpayer elected to avail of the OSD not
exceeding forty percent (40%) of gross sales
or gross receipts for individual, or forty percent
(40%) of gross income for a corporation, it shall
signify in his/its return such intention,
otherwise he/it shall be considered as having
availed himself of the itemized deductions. Once
the taxpayer avail the OSD, it shall be
irrevocable for the taxable year which the
return was made. This means that if a taxpayer
who initially filed a return availing OSD is
precluded from amending said return in order
to shift to itemized deductions.
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An individual who is entitled to and claimed the CONTACT DETAILS
OSD shall not be required to submit with his tax
return such financial statements otherwise DONNIES T. ALAS
Chairman / CEO
required under the Code. Provided, that, except Email Address: donniesalas@rsm-alasoplascpas.com
when the Commissioner otherwise permits, the
said individual shall keep such records pertaining MARYCRIS S. OPLAS
Managing Partner
to his gross sales or gross receipts. In the case of Email Address: marycrisoplas@rsm-alasoplascpas.com
a corporation, however, said corporation is still
MERCY M. RODRIGUEZ
required to submit its financial statements when Audit & Assurance
it files its annual income tax return and to keep Email Address: mercyrodriguez@rsm-alasoplascpas.com
such records pertaining to its gross income as GLESIE R. MARTINEZ
herein defined. Audit & Assurance
Email Address: glesiemartinez@rsm-alasoplascpas.com

In the filing of the quarterly income tax returns,
the taxpayers may opt to use either the itemized
deductions or OSD. However, in filing the final
adjustment income tax return, the taxpayer must
make a choice as to what method of deduction it
or he shall employ for the purpose of determining
its/his taxable net income for the entire year. The
taxpayer is, thus not allowed to use hybrid
method in claiming its/his deduction for one
taxable year.
ANNA LURENE B. SENDAYDIEGO
Internal Audit & Risk Management Advisory
Email Address: annasendaydiego@rsm-alasoplascpas.com
MARY GRACE L. VELANDRES
Accounting and Outsource
Email Address: marygracevelandres@rsm-alasoplascpas.com
NESSA M. OPLAS
Branch Manager, Bacolod Office
Email Address: nessaoplas@rsm-alasoplascpas.com
MA. LEONIFE R. OBANIANA
Email Address: leonifeobaniana@rsm-alasoplascpas.com

CINDY MADONERO
Corporate and individual taxpayers can avail OSD Executive Assitant to Partners
for the computation of their taxable income for Email Address: cindymadonero@rsm-alasoplascpas.com
2008, but since the RA 9504 become effective
only on July 6, 2008, and for the simplification
and provide ease of administration during the
transition period, July 1, 2008 shall be considered
as the start of the period when the 40% OSD may
be allowed.

On the transition period, for the purpose of

availing OSD, individual taxpayer has the option to
use the itemized deductions or the 40% OSD in
the filing of its quarterly income tax return
covering the third quarter ending September 30,
2008. However, if in the filing of his annual income
tax return and he chooses OSD to be his method
of deduction, the rate of OSD to be applied for the
period covering January 2008 to June 30, 2008
shall be 10% of gross income while the rate of OSD
for the period covering July 1, 2008 to December
2008 shall be 40% of the gross sales/gross
receipts. The information contained herein is for
general reference purposes only and should
not be used or treated as professional advice.
For corporate taxpayers opting to use the OSD in Readers should seek professional advice
claiming its deductions when filing its annual before making any business decision or you
income tax return for the year 2008 shall be may call us for any questions or clarifications.
allowed to use the 40% OSD only in respect to the
period beginning July 1, 2008, while the method of
deduction to be used prior thereof shall remain to Alas, Oplas & Co., CPAs is an independent member firm
be under the itemized deduction method. of RSM International, an affiliation of independent
accounting and consulting firms.