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8box Solutions Inc.

REVENUE MEMORANDUM CIRCULAR NO. 44-2007 issued on July 6, 2007 clarifies the taxability of agricultural suppliers for withholding tax purposes in respect to sales made to top 10,000 corporations and to the government in relation to Revenue Regulations (RR) No. 3-2004, which suspended the implementation of withholding tax on income payments made to suppliers of agricultural products under Section 2.57.2(S) of RR No. 2-98, as amended.

  1. On income payments made by top 10,000 private corporations under Section 2.57.2(M) of RR No. 2-98, as amended – Income payments received by agricultural suppliers from these taxpayers are subject to withholding tax but only at the rate provided for by Section 2.57.2(S) which is 1%. The withholding tax rates under Section 2.57.2(M) shall only apply if there is no other tax rates provided in the Regulations, which is not the case for agricultural suppliers.
  2. On income payments made by government under Section 2.57.2(N) of RR No. 2-98, as amended – Income payments received by agricultural suppliers from these taxpayers are subject to withholding tax but only at the rate of 1% for the same reason above cited.
  3. On income payments made by hotels, restaurants, resorts, caterers, food processors, canneries, supermarkets, livestock, poultry, fish and marine products dealers, hardwares, factories, furniture shops and all other establishments under Section 2.57.2(S) of RR No. 2-98, as amended by RR No. 1-2004 but suspended by RR No. 3-2004 – Income payments received by agricultural suppliers from the aforementioned payors not otherwise covered by the other provisions of the withholding tax regulations are subject to withholding tax at the rate of 1%.

         The following are the taxability of agricultural suppliers upon the effectivity of RR No. 3-2004:

  1. On income payments made by top 10,000 private corporations under Section 2.57.2(M) of RR No. 2-98, as amended – Income payments received by agricultural suppliers from these taxpayers are subject to withholding tax at the rate of 1% as supplier of goods.
  2. On income payments made by government under Section 2.57.2(N) of RR No. 2-98, as amended – Income payments received by agricultural suppliers from these taxpayers are subject to withholding tax but only at the rate of 1% for supplier of goods.
  3. On income payments made by hotels, restaurants, resorts, caterers, food processors, canneries, supermarkets, livestock, poultry, fish and marine products dealers, hardwares, factories, furniture shops and all other establishments under Section 2.57.2(S) of RR No. 2-98, as amended by RR No. 1-2004 but suspended by RR No. 3-2004 – Income payments received by agricultural suppliers from the aforementioned payors not otherwise covered by the other provisions of the withholding tax regulations (i.e. RR No. 2-98, as amended) are deemed not subject to withholding tax by virtue of the suspension of the imposition of Section 2.57.2(S) under RR No. 2-98, as amended by RR No. 3-2004.

           There is no ground by which agricultural suppliers can claim that they are exempt from the imposition of withholding tax on their sales to top 10,000 private corporations and/or to the government by virtue of the suspension granted by RR No. 3-2004. In fine, RR No. 3-2004 did not in any way affect the taxability of agricultural suppliers for withholding tax purposes, insofar as their dealings with the top 10,000 private corporations and/or with the government are concerned.

          All concerned internal revenue officers are mandated to check the withholding tax compliance of the top 10,000 private corporations and of the government in respect to income payments made to agricultural suppliers.