withholding tax

Question 1

XYZ Corp. is listed as a top 20,000 Philippine corporation by the Bureau of Internal Revenue. It secured a loan from ABC Bank with a 6% per annum interest. All interest payments made by XYZ Corp. to ABC Bank is subject to a 2% creditable withholding tax.
At the same time, XYZ Corp. has a trust deposit with ABC Bank in the amount of P100,000,000.00, which earns 2% interest per annum, but is subject to a 20% final withholding tax on the interest income received by XYZ Corp.
(a) Who are the withholding agents in the case of:
1. the 20% final withholding tax; and 2. the 2% creditable withholding tax? Explain.

Answer 1

1. The 20% final withholding tax- The Final Withholding Tax (FWT) should be withheld and remitted to the BIR
   by the withholding agent/payor corporation. (Sec. 57(A), NIRC) In this case, ABC Bank shall withhold the
   FWT due on the interest income arising from the trust deposit of XYZ Corp.
2. The 2% creditable withholding tax- The Creditable Withholding Tax (CWT) due on the interest payments made by XYZ Corp. to ABC Bank should be withheld by
   XYZ Corp. Under the withholding tax system, whether final creditable tax, the withholding agent is the person
   who has control over the funds from which the payment of the income is made.

Question 2

When is the deadline for filing a judicial claim for refund for any excess or erroneous taxes paid in the case of: 1. the 20% final withholding tax; and 2. the
2% creditable withholding tax? (2019 BAR)

Answer 2

The deadline for filing a judicial claim for refund for any
excess or erroneous taxes paid are as follows:
1. The 20% final withholding tax- The judicial claim for refund should be filed within two (2) years from the date of actual remittance of the tax or from the last day of the month following the close of the quarter during which withholding was made, whichever comes first.
(Secs. 204 & 229, in relation to Sec. 58, NIRC, as amended by TRAIN Law)
2. The creditable withholding tax- The filing of the judicial claim is within two (2) years from filing of the final income tax return of the payee, or last day for its filing, whichever comes first. It is only upon filing of the final income tax return can it be determined with certainty
whether there is a refundable amount. (ACCRA Investments Corp. v. CA, G.R. No. 96322, 20 Dec. 1991)

Question 3

What is the purpose of withholding tax?