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REVENUE MEMORANDUM CIRCULAR (RMC) NO. 079-2026
This Circular provides clarifications on key issues in the implementation of the 1/2% creditable withholding tax (CWT) on Top Withholding Agents (TWA) under RR No. 024-2025, specifically on the classification of covered suppliers, the applicable rate distinctions, and the corrective procedures for erroneous withholding.
| No. | Question | Answer |
| 1 | When is the effectivity of RR No. 024-2025? | RR No. 024-2025 took effect on October 10, 2025, fifteen (15) days following its publication on the BIR website on September 25, 2025. |
| 2 | Does the phrase “gross payments to manufacturers and direct importers” under the said RR mean that one-half percent (1/2%) CWT applies only if the supplier is both a manufacturer and a direct importer, or if the supplier is either a manufacturer or an importer? | The 1/2% CWT rate applies if the supplier is either a manufacturer or a direct importer of the covered goods; it need not be both. A local manufacturer without import activity, or a direct importer bringing goods into the Philippines for sale, is each subject to the rate, provided the goods are enumerated under RR No. 024-2025 and intended for wholesale. |
| 3 | What documentary or registration requirements may be used to establish that a supplier is a manufacturer or direct importer? | Proof of the supplier’s nature of business may be established through, among others: – Bureau of Internal Revenue (BIR) Certificate of Registration – Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC) Registration Documents – Mayor’s/Business Permit – Bureau of Customs (BOC) Importer Accreditation |
| 4 | The 1/2% CWT is imposed on gross payments to manufacturers and direct importers of certain goods intended for wholesale. How should the phrase “intended for wholesale” be interpreted? | “Intended for wholesale” refers to sales made in the ordinary course of business where goods are sold for resale, distribution, or further commercial disposition rather than for final consumption by an end-user. A sale is wholesale when the seller does not ordinarily engage in retail sales and the transaction is consistent with sales to dealers, distributors, resellers, or other commercial buyers; absent clear evidence to the contrary, the seller’s regular course of business controls. A sale is retail where the seller ordinarily engages in retail selling or the transaction is clearly for end-user consumption, in which case the 1% CWT rate under Section 2.57.2(I) of RR No. 002-1998, as amended, applies instead. |
5 | If a Top Withholding Agent (TWA) purchase covered goods from a manufacturer or direct importer whose regular course of business is wholesale, but the goods are acquired for the buyer’s own use or consumption and not for resale, will the 1/2% CWT rate still apply? | Yes. The 1/2% rate applies based on the seller’s status and regular course of business as a wholesale-oriented manufacturer or direct importer, regardless of the buyer’s purpose in acquiring the goods. Where the seller ordinarily engages in retail sales, the 1% rate under RR No. 002-1998 applies instead. |
| 6 | RR No. 024-2025 mentions that the 1/2% CWT applies to purchases of motor vehicle in Completely Built Unit (CBU) or Semi-Knocked Down (SKD) unit. Does this mean that motor vehicles imported or manufactured in Completely Knocked Down (CKD) condition are excluded? | No. CKD units are classified as motor vehicle parts and accessories under BOC Memorandum Order No. 4-2003 and remain subject to the 1/2% CWT when purchased from a manufacturer or direct importer in the ordinary course of business. |
| 7 | Under the term “motor vehicles”, are motorcycles likewise included for purposes of the 1/2% CWT rate? | Yes. Motorcycles fall under the legal definition of “motor vehicles” in Section 3(a) of Republic Act (RA) No. 4136 (Land Transportation and Traffic Code) and are therefore subject to the 1/2% CWT when purchased from a manufacturer or direct importer in the ordinary course of business. |
| 8 | A motor company manufactures CBU motorcycle units using CKD parts intended for wholesale. Relative to this, how should the phrase “manufacturing of motor vehicles in CBU or SKD units” be interpreted? Does it refer to the manufacturing of motor vehicles forming into CBU or SKD units, or the manufacturing of motor vehicles using CKD or SKD units? | The phrase refers to the output of the manufacturing process motor vehicles that are in CBU or SKD form upon completion not to the use of CKD or SKD components as manufacturing inputs. |
| 9 | What products are covered by the term “pharmaceutical products” as used in RR No. 024-2025? | “Pharmaceutical products” refers to products covered under RA No. 3720, as amended by RA No. 9711 [Food and Drug Administration (FDA) Act of 2009], including medicines, drugs, and other preparations for diagnosis, cure, mitigation, treatment, or prevention of disease, as classified and regulated by the FDA. Coverage extends to products sold by manufacturers or direct importers whose primary business activity, per BIR and other government registrations, is the manufacture or importation of such products. |
| 10 | A pharmaceutical company manufactures and sells milk. Is milk classified as a “pharmaceutical product” for purposes of RR No. 024-2025, and therefore subject to the 1/2% withholding tax rate? | Generally, no. Milk is classified as a food or nutritional product under Department of Health (DOH) Administrative Order No. 2014-0029 unless specifically formulated and registered with the FDA as a therapeutic or pharmaceutical preparation. Only milk products duly registered as such qualify as “pharmaceutical products” subject to the 1/2% CWT rate. |
11 | What does “solid or liquid fuels and related products” mean? | These terms are construed in relation to petroleum products under Section 148 of the Tax Code, as amended, and RA No. 8479 (Downstream Oil Industry Deregulation Act). Solid fuels cover petroleum-derived solid or semi-solid combustion/industrial products (e.g., petroleum coke, asphalt, greases, waxes, petrolatum). Liquid fuels cover petroleum products used directly as fuel or energy sources (e.g., bunker fuel oil, diesel, kerosene, gasoline grades, LPG). Related products cover items derived from or functionally tied to fuel formulation, energy systems, or industrial application (e.g., process oils, lubricants, coolants, solvents, biofuels, additives). |
| 12 | What are the appropriate actions or corrective measures to be undertaken by a TWA who subsequently determines that the 1/2% CWT rate was erroneously imposed and should have been subject to a different rate, or that such rate was actually applicable but was not imposed on its transactions? | The TWA must adjust the tax withheld and apply the correct rate upon filing the Quarterly Remittance Return of Creditable Income Taxes Withheld (BIR Form No. 1601EQ), not later than the last day of the month following the close of the quarter, provided the adjustment is made within the same taxable year (e.g., for Q4 of taxable year 2025, the deadline is January 31, 2026), pursuant to RR No. 011-2018, as amended. |