Withholding tax on commission and brokerage fees: The pertinent issues

This tax was brought into force through the Income Tax Amendment Act No. 8 of 2011. We discuss below the pertinent issues to assist taxpayers with their compliance obligations. Typically, insurance brokers, debt collectors, estate agents and marketing agents are some of the persons who usually earn commission or brokerage fees. The WHT should be deducted from the VAT-exclusive commission or brokerage fees due to a service provider, where applicable. For example, where a person is to pay commission or brokerage fees of say P 224, 000 inclusive of VAT, the WHT would be determined on the VAT- exclusive amount of P 200, 000.

No WHT is deductible if the annual commission or brokerage fee is less than P 36, 000. As payments for commission and brokerage fees are usually done on a monthly basis, it seems, based on my observations, that there is a practice of deducting the WHT only on the amount in excess of P 3, 000. It should be noted that once the amount is P 3, 000 or more, the 10% WHT is deductible on the full amount.