Withholding tax slapped on income paid by JVs, consortia to suppliers

The government will start imposing creditable withholding tax on certain income payments made by joint ventures (JV) and consortia to their suppliers, according to the Bureau of Internal Revenue (BIR).

Revenue Regulations (RR) No. 14-2023 dated Oct. 2 imposed a 1 percent creditable withholding tax on payments made by these companies to their local suppliers of goods. For payments made to suppliers of services, a 2 percent withholding tax will be collected.

Meanwhile, the BIR said a 15 percent creditable withholding tax would be applied to the share of each member of a joint venture or consortium to the company’s net income.

Creditable withholding taxes are advance taxes collected at source. This allows the BIR to collect taxes ahead of the annual tax filing deadline.

The latest regulation amended the 25-year-old RR No. 2-98 by adding the new items to Section 2.57.2. The new RR will take effect 15 days after the publication in a newspaper of general circulation in the Philippines.

Sought for comment, Eleanor Roque, tax advisory head at accounting and auditing firm P&A Grant Thornton, said the new regulations would give the BIR an easier time to tax the income of suppliers.

“It allows the BIR to easily capture income of the suppliers since the alphalist (alphabetical list) submitted by the withholding agents can be compared with the alphalist submitted by the suppliers through data matching,” Roque said. An alphalist is a list submitted by a payee to the BIR that shows, among others, the nature and amounts of income paid to a recipient.

According to Roque, the joint ventures and consortia, as withholding agents, can easily comply with the new rules since they can just compute the withholding tax to be deducted from their payments to suppliers and remit the money to BIR.

But Roque said the amount withheld in the payment of goods and services represents cash that could have circulated in the suppliers’ business.