Reduced EWT Rate for self-employed individuals and professionals

THE Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No.1-2018, lowering the expanded withholding tax (EWT) rate on income payments to selfemployed individuals and professionals to 8% from 10% or 15%, regardless of the amount of income payment.

Income payments covered by the new rate include the following:

1. Professional fees, talent fees, commissions, etc. for services rendered by individuals;

2. Income distribution to beneficiaries of Estates and Trusts;

3. Income payment to certain brokers and agents;

4. Income payment to partners of General Professional Partnership;

5. Professional fees paid to medical practitioners; and

6. Commission of independent and/or exclusive sales representatives and marketing agents of companies.

The reduction in the EWT rate on income payments to self-employed individuals and professionals was implemented to align with the provisions of the Tax Reform for Acceleration and Inclusion (Train) Law. Under the Train law, self-employed individuals and professionals are given the option to be subject to 8% income tax on their gross sales/ receipts and other nonoperating income in lieu of the graduated income tax rate and percentage tax.

If paid to taxable juridical persons, the income payments above remain to be subject to 10% or 15% EWT rate.

The Circular also laid out the steps and sample computations in using the revised withholding tax table on compensation to guide employers for compensation payments effective January 1, 2018.

Please be guided accordingly. Source: P&A Grant Thornton Certified Public Accountants

Punongbayan & Araullo (P&A) is the Philippine member firm of Grant Thornton International Ltd