Withholding tax on Meralco refunds brought down to 15%
The Department of Finance (DOF) has approved the reduction in the creditable withholding tax on refunds paid by Manila Electric Co. (Meralco) to their customers effective Jan. 1.
Finance Secretary Carlos Dominguez signed a new Bureau of Internal Revenue (BIR) revenue regulation, which cut by almost half the withholding tax on Meralco refunds to 15 percent from the current rate of 25 percent to 32 percent, as provided under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The new issuance also lowered the withholding tax on the interest income of refunds paid to non-residential Meralco customers to 15 percent from the current 20 percent.
Finance Undersecretary Antonette Tionko, who recommended the approval of the new RR, said the withholding tax on the interest income on the refund of meter deposits paid to residential and general service customers, whose monthly consumption exceeds 200 kilowatts per hour, will be retained at 10 percent.
Internal Revenue deputy commissioner Marissa Cabreros said the copy of the new RR has yet to be remitted by the DOF to the bureau as of writing. Once received, the BIR will have the issuance numbered and uploaded in the BIR website.
The Supreme Court on April 9, 2003 affirmed the decision of the then-Energy Regulatory Board to issue refund to customers who were overcharged since February 1994, after the company passed on its income tax payments as costs tucked in the consumers’ monthly electricity bills.
Currently, Meralco refunds are imposed with a creditable withholding tax of 25 percent for customers with active contracts, and 32 percent for those with terminated contracts.
Tionko said the rates would be cut to a flat 15 percent rate effective Jan. 1, 2019 as provided under Section 17 of the TRAIN Law.
Section 17 of TRAIN, which amends Section 57 (B) of the National Internal Revenue Code, provides that the withholding tax on income payable to persons residing in the Philippines shall not be less than one percent, but not more than 15 percent of the income payment, effective. Jan. 1, 2019.
The new RR also covers the withholding tax on the interest income derived from any other debt instruments, which has been reduced from 20 to 15 percent.