BIR Clarifies 0.5% Creditable Withholding Tax for Wholesale Goods

The Philippine Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 79-2026, clarifying the application of a preferential 0.5% creditable withholding tax (CWT) on gross payments made by top withholding agents to manufacturers or direct importers for covered goods intended for wholesale. The issuance aims to promote the uniform implementation of Revenue Regulations No. 24-2025, provide clearer guidance to withholding agents and taxpayers, and ensure the proper application of withholding tax rules in covered transactions. According to the circular, the 0.5% CWT rate applies if the supplier is either a manufacturer or a direct importer of the covered goods. The supplier is not required to be both. A local manufacturer that produces and sells the specified goods, even without import activity, and a direct importer that brings in such goods for sale in the Philippines may qualify for the preferential rate, provided the goods are covered and intended for wholesale. Meanwhile, the BIR stated that the 0.5% rate may still apply when a top withholding agent purchases covered goods for its own use or consumption rather than for resale. "The controlling factor in determining the applicability of the preferential 0.5% CWT rate is the status and regular course of business of the seller as a manufacturer or direct importer engaged primarily in wholesale transactions, and not the purpose for which the buyer acquires the goods," it said. The BIR also clarified that motorcycles are considered motor vehicles, while vehicles imported or manufactured in completely knocked down condition fall under motor vehicle parts and accessories. Purchases of these goods may therefore be subject to the 0.5% rate, "provided the sale is made in the ordinary course of the seller’s business." It also clarified that pharmaceutical products are only covered by the preferential rate if they are classified and regulated by the Food and Drug Administration. Meanwhile, if a top withholding agent discovers that it used the wrong rate, it must adjust the amount withheld and reflect the correct rate in its Quarterly Remittance Return of Creditable Income Taxes Withheld. The correction must be made within the same taxable year. — Justine Irish D. Tabile