BSP’s obligation to withhold reduced from 5% to 1%

THE Bureau of Internal Revenue issued Revenue Regulations (RR) No. 7-2017 to amend certain provisions covering taxation on sale of gold and other metallic mineral products to the Bangko Sentral ng Pilipinas (BSP).

RR No. 7-2017 reduces the BSP’s obligation as withholding agent of the creditable withholding tax on mineral sales from a withholding tax rate of 5% to 1%.

Under Section 4 of RR No. 6-2012, all buyers of metallic minerals are constituted as agents for the collection of 2% excise tax on metallic minerals and 5% creditable withholding tax. However, pursuant to the new regulation, the BSP as constituted agent shall only collect the 1% creditable withholding tax on its purchase of metallic minerals instead of 5% plus the 2% excise tax due, and remit the same to the government.

The sellers or possessors of said metallic minerals must be able to show proof of withholding and remittance of the 1% withholding tax thereof to avoid disallowance of claimed costs and expenses associated with the metallic minerals sold to BSP in computing the seller’s income tax.

This amendment is a move seen to encourage small-scale miners to sell back their gold produce to the BSP instead of the black market. On top of this, the said regulation will allow the BSP to build its gross international reserves without having to spend dollars as it would be able to buy gold directly using local currency.

This regulation shall take effect immediately.