Navigate the PH Professional Fee Withholding Tax (PFWT)
Are you a professional in the Philippines? If so, you need to understand and know about the PFWT or the Professional Fee Withholding Tax. This tax is applied to your service fees or other payments. You must know how to compute and pay for it. If you don’t know how to file your taxes properly, this article will help you.
What is PFWT and who is required to pay it?
Professional Fee Withholding Tax is a tax for professional service fees or payments. It will be withheld by you when receiving payments, and you will remit the money to the BIR or the Bureau of Internal Revenue together with your other tax obligations.
According to tax services in Manila, the PFWT or Professional Fee Withholding Tax will be applied to the following:
Lawyers, accountants, doctors, architects, and engineers
Professional Entertainers (actors, actresses, composers, singers, emcees, influencers etc.)
Insurance adjusters and agents, along with professional athletes
Directors and producers who produce movies, television shows, stage, and musical shows
Technical and management consultants not employed full-time
Director fees of an individual who is not an employee of the company
Noteworthy, accounting services in the Philippinesreiterate that those who earn income not exceeding P250,000 a year are not subject to withholding tax.
How do you compute the PFWT of Professional Fee Withholding Tax?
The calculation will depend on the type of professional service you render. The PFWT is computed at a rate of 5% to 15% of your gross payment. It will be withheld by you, the payer when you make the payment. It will then be remitted to the BIR or Bureau of Internal Revenue together with your other tax obligations.
5% Tax Rate – annual gross income is less than PHP 3 million
10% Tax Rate – annual gross exceeding PHP 3 million
Professional Fees Rendered to Corporations or Partnerships:
15% Tax Rate – annual gross exceeding PHP 720,000
10% Tax Rate – annual gross income is less than PHP 720,000
Tax and audit services in the Philippinesshare that there is an ATC or Alphanumeric Code when you file your professional fee withholding tax. The ATC for services to individuals is W1010 to W1091. The ATC for corporations is from WC010 to WC081.
Obligations of Withholding Agents for PFWT
File Sworn Declaration
Do this on or before the 30th of January to let BIR be aware of how many individuals have given you copies of your BIR Certificate of Registration.
File Withholding Tax Monthly
File BIR Form 1601-E and pay it on or before the 10th day of each succeeding month. If you are not usingEFPS, you need to do it within 10 days of the end date ofapplicable quarter.
File Withholding Tax Quarterly
If you are using EFPS, file it within 10 days of the end date for each month’s applicable quarter for your payments to not be late.
Using BIR Form 1601EQ, file and pay your withholding tax on or before the last day of the month following the end of each quarter.
Issue Withholding Tax Statement
Issue BIR Form 2307 within 20 days from the end of each quarter of when you pay and withhold your taxes.
File Annual Information Return
File BIR Form 1604E annually every March 1 to let the government be aware of how much you withheld tax from your employees.
Penalties of Non-Compliance with Tax Obligations
If you are remiss in your PFWT, you may face the following:
Not Filing Income Tax Return
PHP 5,000 Fine for every year that you don’t file your income tax return.
Not Paying Tax Owed
Interest rate of 20% for every year that you do not pay and 5% penalty of the due amount for every unpaid month.
Not withholding and remitting tax
PHP 10,000 fine per year, an interest rate of 20% per year on unpaid amount, and 5% penalty of the due amount for every unpaid month.
Not withholding returns
PHP 1,000 fine every time you fail to file, interest rate of 20% per year on the unpaid amount, and 5% penalty of the due amount for every month it remains unpaid.
Not giving withholding tax statements to payees
PHP 1,000 fine for every piece of information you fail to provide to the payee, 20% charged interest rate per year on the unpaid amount, and 5% penalty of the due amount for every month it remains unpaid.
If you’re a professional in the Philippines and need assistance with understanding and complying with the Professional Fee Withholding Tax (PFWT), our accounting services in Pasigare here to help. The PFWT is an important tax that applies to professional service fees or payments, and it’s crucial to compute and remit it correctly.
Our team of experts can guide you through the process, ensuring compliance and avoiding penalties. Whether you have questions about tax calculations, filing obligations, or any other related matters, don’t hesitate to reach out to our accounting services in Pasig for professional assistance. Let us simplify the complexities of PFWT and help you navigate your tax obligations with ease.
The calculation will depend on the type of professional service you render. The PFWT is computed at a rate of 5% to 15% of your gross payment. It will be withheld by you, the payer when you make the payment. It will then be remitted to the BIR
BIR
The Bureau of Internal Revenue (Filipino: Kawanihan ng Rentas Internas, or BIR) is a revenue service for the Philippine government, which is responsible for collecting more than half of the total tax revenues of the government. It is an agency of the Department of Finance and it is led by a Commissioner.
https://en.wikipedia.org › wiki › Bureau_of_Internal_Revenue
Professional fees, talent fees, and consultancy fees payable to individual payees are now subject to 5%/10% withholding tax (8% under RMC No. 01-2018, and 10%/15% prior to this ).
Professional fees of consultants who are individuals are subject to 5% CWT if the current year gross income does not exceed P3,000,000.00 (3M), otherwise 10% CWT if exceeding.
The Withholding of Creditable Tax at Source or simply called Expanded Withholding Tax is a tax imposed and prescribed on the items of income payable to natural or juridical persons, residing in the Philippines, by a payor-corporation/person which shall be credited against the income tax liability of the taxpayer for ...
There are different types of withholding taxes for corporations and individuals in the Philippines — namely, the Final Withholding Tax, Expanded Withholding Tax, and Withholding Tax on Compensation.
Every person legally authorized to practice his profession shall pay the professional tax to the province where he practices his profession or where he maintains his principal office in case he practices his profession in several places: Provided, however, That such person who has paid the corresponding professional ...
An exemption from the withholding tax applies to remittances made to a seller/merchant where the annual total gross amount for the past taxable year is PHP 500,000 or below, which will benefit smaller scale transactions in particular.
Generally, there are two kinds of withholding tax, final withholding tax (FWT) and creditable withholding taxes (CWT). Under the FWT system, the amount of income tax withheld by the withholding agent is considered the full and final payment of income tax due on the income.
The amount of tax withheld from your pay depends on what you earn each pay period. It also depends on what information you gave your employer on Form W-4 when you started working. This information, like your filing status, can affect the tax rate used to calculate your withholding.
Corporations and individuals engaged in business are required to withhold the appropriate tax on income payments to non-residents, generally at the rate of 25% in the case of payments to non-resident foreign corporations and for non-resident aliens not engaged in trade or business (see the Income determination section ...
A Philippine payor deducts the FWT and remits it to the Bureau of Internal Revenue (BIR). There are situations, however, when the tax withheld and remitted is more than what was due. If a claim for refund is to be exercised for erroneous payment, a claimant encounters, among others, several challenges.
For employees, withholding is the amount of federal income tax withheld from your paycheck. The amount of income tax your employer withholds from your regular pay depends on two things: The amount you earn. The information you give your employer on Form W–4.
The US Philippines tax treaty, signed in 1976, serves as an agreement between the two countries for determining the taxation of income where both nations may have the legal right to tax according to their respective laws.
Suppose you earn $2,000 per pay period. Instead of receiving $2,000, you receive a paycheck for $1,600, because your employer has set aside $400 as a tax withholding. For the year, you pay $10,400 in withheld taxes.
In most cases, a foreign national is subject to federal withholding tax on U.S. source income at a standard flat rate of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign national's country of residence and the United States.
Late last year the tax authorities issued a notice to the public identifying the top withholding agents (TWAs) who are mandated to withhold expanded withholding tax (EWT) equivalent to one percent (1%) on purchase of goods and two percent (2%) on purchase of services from local or resident suppliers, including non- ...
However, some common expense categories for professional fees include: Legal Fees: These can include fees for attorneys, paralegals, and other legal professionals. Accounting Fees: These can include fees for certified public accountants (CPAs), bookkeepers, and other financial professionals.
Non-TREs without establishments or places of business in China shall be subject to a WHT at 10% on gross income from dividends, interest, lease of property, royalties, and other China-source passive income unless reduced under a tax treaty.
The Philippine payor making outbound service payments to the foreign recipient will be required to subject those payments to 25% final withholding tax and 12% final withholding value-added tax.
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