Lease or rent payment is subject to withholding tax

Another taxable year just ended and only at this point of time we realized that , being the business owner, bookkeeper or an accountant, we had not subjected rent to withholding. 

For whatever reasons we had, we do not need any justification for such negligence, the only thing to do is to comply late with a penalty. There was a very nice commercial slogan used before by a pizza delivery, "If it is late, it is free", but that is good for a pizza; for the Bureau of Internal Revenue, ''if it is late, deal with it with a penalty". 

It has been... been... been, yes! in the past we were taught that in doing business, rent is subject to Expanded Withholding Tax. 

Some of the reasons, Why and How?,  a no withholding on rent happens;

1. Negligence
2. Contract is Silent about withholding  
3. TIN of property owner is not available, or;
4. Simply the property owner is not registered with the BIR, and;
5. Therefore can not issue an Official Receipt

Reason No. 1 - Negligence if everyone involved in the processing of payments forgot to deduct from the monthly payment the corresponding EWT, most of the time this scenario happens when the landlord or lessor requires a post dated  check - PDC be issued in advance for the entire year.

Reason No. 2 - The contract has no stipulations about who will cover the EWT. is it for lessor or tenant account? My own practice of doing so, if the contract is silent and I am not a party to the contract, the EWT is deductible from the lessor. If the landlord disputes, then they have to rectify the contract.

Reason No. 3 - The rent payment was processed with EWT deduction, but no way to remit it to the BIR, because the property owner does not issue Official Receipt, because of non-registration with the BIR.

There may be other reasons for  non-withholding on rent, but based on experience the above are common.

Bear in mind that March 1, preceding every taxable year, is the filing to the BIR, the Alphalist of Payees Subjected to Expanded Withholding TAX, and before that, everything related to EWT, its application and remittance to BIR should have been cleared; otherwise, more problems will be encountered if the financial statement with the corresponding Income Tax Returns was filed and received by the BIR noting only the non-compliance and did nothing to correct it.

There are more issues about EWT that are not discussed in this topic so hold on for the coming discussions about it.

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