BIR clarifies rules on creditable withholding tax application

The Bureau of Internal Revenue (BIR) has issued a circular clarifying rules on the proper application of creditable withholding tax (CWT). In a statement issued Tuesday, the BIR said it issued Revenue Memorandum Circular (RMC) No. 79-2026. RMC 79-2026 clarifies the implementation of Revenue Regulations (RR) No. 24-2025, which gives Top Withholding Agents (TWAs), manufacturers, direct importers and other taxpayers guidance on CWT application. The taxman said its circular answers frequently asked questions on the 0.5% CWT for covered wholesale purchases, explains when the preferential rate applies, identifies documentary requirements needed to establish a supplier’s status, and outlines corrective measures when the wrong withholding tax rate has been used. The BIR added the move is intended to promote uniform compliance, reduce confusion and improve tax administration. The new circular also focuses on transactions involving manufacturers and direct importers of covered goods intended for wholesale. It explains how the phrase “intended for wholesale” should be interpreted and what documents taxpayers must present to qualify for the preferential one-half percent CWT rate, according to the BIR. RMC No. 79-2026 also provides specific guidance for industries that raised implementation questions, which include purchases involving motor vehicles in Completely Built Unit (CBU) and Semi-Knocked Down (SKD) form, motorcycles, pharmaceutical products, and solid and liquid fuels and related products. The circular also prescribes appropriate corrective measures when taxpayers or withholding agents apply an incorrect withholding tax rate. By clarifying these procedures, the BIR aims to minimize errors and ensure taxes are withheld and reported correctly. The issuance complements RR No. 24-2025, which expanded and refined the withholding tax framework for Top Withholding Agents. The BIR regularly releases revenue memorandum circulars to answer implementation issues raised by taxpayers and revenue officers after new tax regulations take effect. “Through these clarifications, the BIR seeks to provide greater certainty for taxpayers while ensuring the proper and consistent application of withholding tax rules,” the BIR said. The taxman said businesses covered by the rules are encouraged to review RMC No. 79-2026 carefully and ensure their accounting, procurement and tax compliance procedures align with the updated guidance. The BIR said the clarifications will help streamline compliance, reduce disputes and support more efficient tax administration. — RSJ, GMA News