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Bir Ruling (Da 204 06)
Bir Ruling (Da 204 06)
Under the final withholding tax system, the amount of income tax withheld
by the withholding agent is constituted as a full and final payment of the income
tax due from the payee on the said income. The liability for payment of the tax
rests primarily on the payor as withholding agent (Section 2.57(A) f Revenue
Regulations No. 2-98, as amended). Under Section 57(A) of the Tax Code of
1997, the organizer is considered as the withholding agent required by law to
withhold such tax in the same manner and subject to the same conditions as
provided in Section 58 of the same Code. The tax on prizes and winnings is
imposed on the winner although the responsibility for the withholding of such tax
is entrusted by law upon the payor.
The exemption under Section 24(B)(1) of the Tax Code of 1997 refers to
exemption from the requirement of withholding (on the part of the payor) and not
exemption from the payment of income tax (on the part of the winner). Clearly,
prizes and winnings are subject to income tax regardless of the amount.
Under the withholding tax system, prizes and winnings in the amount
exceeding PhP10,000.00 shall be subject to withholding. However, if the prizes is
PhP10,000.00 or less, there will be no requirement on the part of the payor for the
withholding of the 20% final tax but the income recipient (winner) is required to
file an income tax return as prescribed in Sections 51 and 52 of the Tax Code of
1997 and declared the amount of his prize/winning in his income tax return, which
amount shall be subject to tax under Section 24(A) of the Tax Code of 1997.
To rule that prizes and winnings of winners on won on separate games and
days should be lumped, would be adding or incorporating matters not provided in
the law by administrative ruling. What is clear from the above provision is that
prizes and winnings in the amount less than PhP10,000.00 won per game or raffle
draw is not subject to the 20% withholding tax. Since your PhP5,000.00 winning
per game per day is less than PhP10,000.00, the said prize should be exempt from
the requirement of withholding, therefore, not subject to the 20% withholding tax
under Section 24(B)(1) of the Tax Code of 1997. However, you are required to file
an income tax return and declare the amount of your prize/winning in the said
return, which amount shall be subject to tax under Section 24(A) of the Tax Code
of 1997.
Please be guided accordingly.
Copyright 2014
Copyright 2014