REVENUE REGULATIONS NO.

17-2003 issued on May 6, 2003 amends further

pertinent provisions of RR Nos. 2-98, 8-98 and 13-99, as amended, by providing for
additional income payments subject to creditable withholding tax; clarifying existing
provisions on income payments subject to creditable/expanded withholding tax and the
requirements for deductibility of certain payments; providing for withholding as the
mode of remitting final Capital Gains Tax on the sale of real property classified as capital
asset, and for other purposes.
The following forms of income payments shall be subject to final withholding
tax at the rates herein specified:
1) income payments to a citizen or to a resident alien individual on capital
gains presumed to have been realized from the sale, exchange or other
disposition of real property located in the Philippines classified as capital
assets, including pacto de retro sales and other forms of conditional sales
based on the gross selling price or fair market value, whichever is higher -
6%; and
2) income payments to a domestic corporation on capital gains presumed to
have been realized from the sale, exchange or other disposition of land and
building located in the Philippines classified as capital assets, based on the
gross selling price or fair market value, whichever is higher - 6%.
In case of sale on installment of real property classified as capital asset, the
procedures on the sale of real property classified as ordinary asset shall apply, with
the exception that the withholding tax on the former shall be final whereas that on the
latter shall be creditable.
In case of dispositions of real property classified as capital asset by
individuals to the government or any of its political subdivisions or agencies or to
government-owned or controlled corporations, the tax to be imposed shall be
determined either under Section 24(A) of the Tax Code for the normal rate of income
tax for individual citizens or residents, or under Section 24(D)(1) of the Code for the
final tax on the presumed capital gains from sale of property at 6%, at the option of
the taxpayer-seller.
In case of sale/transfer of principal residence, the Buyer/Transferee shall
withhold from the Seller and shall deduct from the agreed selling price/consideration
the 6% Capital Gains Tax, which shall be deposited in cash or managers check in
interest-bearing account with an Authorized Agent Bank (AAB) under an Escrow
Agreement between the concerned Revenue District Officer (RDO), the Seller and the
Transferee, and the AAB to the effect that the amount so deposited, including its
interest yield, shall only be released to such Transferor upon certification by the said
RDO that the proceeds of the sale/disposition thereof has, in fact, been utilized in the
acquisition or construction of the Sellers/Transferors new principal residence within
eighteen (18) calendar months from date of the said sale or disposition.
A creditable Income Tax shall be withheld at the rates herein specified from
the following items of income payments made to persons residing in the Philippines:
NATURE OF INCOME PAYMENT RATE
1) Gross rental or lease in excess of P 10,000.00 annually for the
continued use or possession of personal property used in
business, which the payor or obligor has not taken or is not
taking title, or in which he has no equity, except those under
financial lease arrangements with leasing and finance
companies authorized to operate under the Financing
Company Act of 1998
5%
2) Gross payments to labor recruiting agencies and/or labor-
only contractors, whether individual or corporate
2%
3) Gross commissions or service fees of customs, insurance,
stock, real estate, immigration and commercial brokers and
fees of agents of professional entertainers
10%
4) Professional fees paid to medical practitioners 10%
5) Gross selling price or its equivalent paid in installment to the
seller/owner of real property classified as ordinary assets
Tax to be deducted and
withheld by the buyer from
every installment payment
shall be based on the ratio of
actual collection of
consideration vs. the agreed
consideration appearing in
the Contract to Sell
6) Income payments made by the top 10,000 private
corporations to their local/resident supplier of goods and
services, including non-resident alien engaged in trade or
business in the Philippines
1% for supplier of goods
2% for supplier of services
7) income payments made by the government to its
local/resident supplier of goods and of services, except any
casual or single purchase of P10,000.00 and below
2%
8) Gross commissions, rebates, discounts and other similar
considerations paid/granted to independent and/or exclusive
sales representatives and marketing agents and sub-agents of
companies, including multi-level marketing companies, on
their sale of goods or services by way of direct selling or
similar arrangements where there is no transfer of title over
the goods from the seller to the agent/sales representative
10%
9) income payments made to regular agricultural suppliers such
as those, but not limited to, payments made by hotels,
restaurants, resorts, caterers, food processors, canneries,
supermarkets, livestock, poultry, fish and marine food product
dealers and all other establishments, except for income
payments to casual agricultural suppliers where the annual
gross purchases therefrom do not exceed P 20,000
1%
10) Income payments on purchases of minerals, mineral
products, and quarry resources such as but not limited to
silver, gold, marble, granite, gravel, sand, boulders and other
materials /products
1%
Insofar as taxable sales, exchanges or transfers of real property are concerned, the
buyers, whether or not engaged in trade or business, are constituted as withholding
agents. In any case, no Certificate Authorizing Registration (CAR)/Tax Clearance
Certificate (TCL) shall be issued to the buyer unless the withholding tax due on the sale,
transfer or exchange of real property has been duly paid.
The provisions of the Regulations shall cover income payments made starting
June 1, 2003.