Expanded Withholding Tax Compliance: A Refresher for Businesses

Atty. Yasser Aureada, CPA
Oct 9
3 min read

For every business operating in the Philippines, understanding and properly managing Expanded Withholding Tax (EWT) is vital to ensuring compliance and avoiding costly penalties. The recent presentation, “Expanded Withholding Tax Compliance – Refresher Basics,” by YRA Business Solutions Corp. provided a clear overview of the laws, procedures, and best practices governing EWT obligations for both individuals and corporations.

What Is Expanded Withholding Tax?

EWT is a system of collecting income tax in advance, ensuring tax collection at the source of income.

It applies only to specific payments identified under EWT regulations.
It is creditable against the payee’s final income tax liability.
Both the payor and payee must generally be Philippine residents, except in cases involving non-resident aliens engaged in trade or business in the country (page 2).

Legal Foundations

EWT is anchored in Sections 57(B) and 58 of the National Internal Revenue Code (NIRC), supported by key regulations:

RR No. 2-98 and RR No. 11-2018 – implementing the TRAIN Law
CREATE Law – requiring periodic review of withholding rules every three years
RR No. 6-2018 – providing procedural updates to withholding and remittance (page 3)

These empower the Bureau of Internal Revenue (BIR) to adjust withholding mechanisms as needed.

Who Are Required to Withhold?

As outlined on pages 4–7, the following are considered withholding agents:

Juridical persons (corporations and partnerships)
Individuals engaged in business or professional practice
Government offices, including GOCCs and LGUs
Political parties or candidates with campaign expenditures

Additionally, Top Withholding Agents (TWA) under RR No. 31-2020 and RMC No. 70-2023 are required to withhold:

1% on goods
2% on services

Thresholds: ₱12 million for RDO groups A & B; ₱5 million for groups C, D & E.

Exemptions from Withholding

The presentation identified exemptions for:

The National Government (except GOCCs)
Corporations with special tax exemptions
General Professional Partnerships
Non-taxable joint ventures
Individuals earning ₱250,000 or less from a single income source (page 9)

Common Payments Subject to EWT

Examples include:

Professional and talent fees (5%–15%)
Rentals (5%)
Contractor payments (2%)
Sales of real property classified as ordinary assets (6%)
Payments by Top Withholding Agents for goods/services (1% or 2%)

Timing of Withholding and Deadlines

Under RR No. 4-2024, the obligation to withhold arises when:

An expense becomes due, demandable, or legally enforceable, or
A sales invoice is issued — whichever comes first (page 16).

Filing and Payment Deadlines (page 24):

BIR Form 1601-EQ (Quarterly EWT Return): Last day of the month following the quarter
Quarterly Alphalist of Payees (QAP): Same deadline as BIR Form 1601-EQ
BIR Form 1606 (Real Property Transfers): Within 10 days after month-end

Failure to Withhold

As emphasized on page 22, refusal by a payee to be subjected to withholding is grounds for mandatory audit and penalties against the taxpayer.

Proper documentation and timely remittance remain the strongest defenses against compliance risks.

Key Takeaway

EWT compliance is more than a legal duty — it is a hallmark of responsible business practice. By staying updated on BIR regulations, keeping accurate records, and meeting deadlines, businesses can:

Prevent unnecessary assessments
Reduce audit risks
Build trust with tax authorities

As YRA Business Solutions Corp. emphasizes:

“Compliance begins with awareness — and consistency ensures success.”