Tax notes: Present tax exemption certificate as proof of withholding tax exemption

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Monday, May 12, 2014


ALL individuals and entities claiming exemption from income tax and, consequently, from withholding taxes shall provide a copy of their valid, current and subsisting tax exemption certificate or ruling to their client before payment of the income.

The certificate or ruling issued by the taxpayer must explicitly recognize the grant of tax exemption and the corresponding exemption from withholding tax.

Under Revenue Memorandum Circular (RMC) No. 8-2014, failure to present the tax exemption certificate or ruling shall subject the taxpayer to the payment of appropriate withholding taxes due on the transaction.

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On the other hand, the failure of the income payor (client) as withholding agent to withhold, notwithstanding the lack of tax exemption certificate or ruling, shall subject the agent to penalties applicable to non-withholding of taxes under Section 251 and other pertinent provisions of the Tax Code.

(Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on May 13, 2014.

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