Withholding of VAT on Government money payments and payments to non-residents
Who are required to withhold?
- Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs).
- Lessee of properties or property rights owned by non-residents.
- Persons for services rendered in the Phil. (including services rendered to local insurance companies with respect to reinsurance premiums payable) by non-residents.
Percentage of withholding VAT
- Government money payments – 5% final VAT
- Payments to non-residents – 12% creditable VAT
What is done with the VAT withheld?
Buyer or Lessee (withholding agent) – remitted to the BIR within 10 days following the end of the month the withholding was made.
Questions to Ponder:
Statement 1: Withholding value-added tax is required at five percent (5%) of the gross payment for the purchase of goods by the Government or any of its political subdivision, or by a government-owned or controlled corporation.
Statement 2: Withholding value-added tax is required at five percent (5%) on every release of installment payment on purchase of service by the Government or any of its political subdivision, or by a government-owned or controlled corporation.
A. Both statements are correct
B. Both statements are wrong
C. First statement is correct but second statement is wrong
D. First statement is wrong but second statement is correct.
2.A VAT-registered supplier sold goods amounting to P500,000 gross selling price to a government-controlled corporation during a particular quarter. Which of the following statements is incorrect in relation to the sale of goods?
A. The sale is subject to withholding of final VAT.
B.The government-controlled corporation will withhold P25,000 final VAT.
C. The government-controlled corporation shall remit the withholding VAT to the BIR within 10 days following the end of the month the withholding was made.
D. The VAT-registered supplier may refuse the withholding of VAT as long as it is willing to pay the full 12% VAT.
For the correct answers, I would like to invite you to join my Facebook exclusive groups of aspiring CPAs for my upcoming project “CPA DREAM ACADEMY ” or sign up for flashcards free http://eepurl.com/coJBmf
JONATHAN RUIZ CPA, MIB