REVENUE MEMORANDUM CIRCULAR NO. 60 - 2004

SUBJECT : Clarification regarding the withholding of creditable value-added tax by government offices for purchases of P1,000.00 and below.

T O : All Internal Revenue Officers and Employees and Others Concerned.

___________________________________________________________________________

This circular is issued to clarify the withholding of creditable value-added tax withheld by government offices (GVAT) on purchase of goods and services amounting to P1,000.00 and below due to numerous queries from Regional/District Offices and taxpayers.

For the information and guidance of all internal revenue officers and employees, quoted hereunder are pertinent provisions of Revenue Regulations No. 2-98 requiring government offices to withhold value-added tax on payments to VAT registered suppliers of goods or services, viz:

“Sec. 4.114 WITHHOLDING OF CREDITABLE VALUE-ADDED TAX
x x x

(A) Rates and basis of creditable value-added tax to be withheld. - The gross payments made by the government to the sellers of goods and services shall be subject to withholding tax at the rates herein prescribed:

(1) In general, payments by the government or any of its political subdivisions, instrumentalities or agencies including government-owned or controlled corporations (GOCCs) on account of its purchase of goods from sellers and services rendered by contractors who are subject tot he value-added tax - On gross payment for the purchase of goods - 3%

On gross payment for services rendered - 6%

(2) Payments made to government public works contractors - 8.5%

(3) Payments for lease or use of property or property rights to non-resident owners - 10%

x x x”

The above provisions shall prevail since RR 2-98 was issued later and therefore all payments made by government offices, regardless of amount, shall be subject to the appropriate rate of withholding tax on VAT. Thus, the last sentence of Section 4.110-3 of RR 7-95 as amended by RR 6-97 exempting from withholding of value-added tax payment of P1,000.00 and below to VAT suppliers/payees shall no longer be applicable and are deemed revoked.

All internal revenue officials and employees are enjoined to give this Circular as wide a publicity as possible.

(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
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