Section

2.57.1 (A) of Revenue Regulations 2-98, as amended Revenue Regulations Nos.

8-98, 6-2001, 17-2013, 11-2018

SECTION 2.57.1. Income Payments Subject to Final Withholding Tax. — The
following forms of income shall be subject to final withholding tax at the rates herein
specified;

(A) Income payments to a citizen or to a resident alien individual;

(1) Interest from any peso bank deposit, and yield or any other monetary
benefit from deposit substitutes and from trust funds and similar
arrangements; royalties (except on books as well as other literary works and
musical compositions), prizes (except prizes amounting to ten thousand
pesos (P10,000.00) or less which shall be subject to tax under Sec. 24 (A)
of the Code) Subsection (A) of Section 24 of the Tax Code, as amended (per
Section 1 of RR No. 11-2018, dated 15 March, retroactively effective to 01
January); and other winnings (except Philippine Charity Sweepstakes
winnings and lotto winnings amounting to P10,000.00 or less which shall be
exempt (per Section 1 of RR No. 11-2018, dated 15 March, retroactively
effective to 01 January)) derived from sources within the Philippines —
Twenty percent (20%).

(2) Royalties on books, as well as other literary works and musical compositions
— Ten percent (10%).

(3) Interest income received by a resident individual taxpayer from a
depository bank under the Foreign Currency Deposit System — Seven
and one-half percent (7.5%) fifteen percent (15%) (per Section 1 of RR
No. 11-2018, dated 15 March, retroactively effective to 01 January).

(4) Interest income from long-term deposit or investment in the form of
savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced by
certificates in such form prescribed by the Bangko Sentral ng Pilipinas
which was pre-terminated by the holder before the fifth (5th) year at the
rates herein prescribed to be deducted and withheld from the proceeds
thereof based on the length of time that the instrument was held by the
taxpayer —

Holding Period Rate
Four (4) years to less than five (5) years 5%
Three (3) years to less than four (4) years 12%
Less than three (3) years 20%

 (5) Cash and/or property dividends actually or constructively received from
a domestic corporation, joint stock company, insurance or mutual fund
companies or on the share of an individual partner in the distributable
net income after tax of a partnership (except general professional
partnership) or on the share of an individual in the net income after tax
of an association, a joint account or a joint venture or consortium of
which he is a member or a co-venturer. - fifteen percent (15%) (per
Section 1 of RR No. 11-2018, dated 15 March, retroactively effective to 01
January).

6% - beginning January 1, 1998
8% - beginning January 1, 1999 and
10% - beginning January 1, 2000 and thereafter (per Section 1 of RR No.
11-2018, dated 15 March, retroactively effective to 01 January).

The tax on cash and property dividends shall only be imposed on dividends
which are declared from profits of corporations made after December 31,
1997.

(6) On capital gains presumed to have been realized from the sale, exchange
or other disposition of real property located in the Philippines, classified
as capital assets, including pacto de retro sales and other forms of
conditional sales based on the gross selling price or fair market value as
determined in accordance with Sec. 6(E) of the Code (i.e. the authority of
the Commissioner to prescribe the real property values), whichever is
higher — Six percent (6%). (see Section 2, RR No. 8-98)

In case of a sale on installment of real property classified as capital asset,
the procedures stated under Sec. 2.57.2(J) hereof on the sale of real
property classified as ordinary asset shall apply with the exception that
the withholding tax on the former shall be final whereas that on the latter
shall be creditable. (Section 2, RR No. 17-03)

In case of dispositions of real property classified as capital asset by the
individuals to the government or any of its political subdivisions or
agencies or to government-owned or controlled corporations, the tax to be
imposed shall be determined either under Section 24(A) of the Code for the
normal rate of income tax for individual citizens or residents or under
Section 24(D)(1) of the Code for the final tax on the presumed capital gains
from sale of property at six percent (6%), at the option of the taxpayer-
seller. (see Section 2, RR No. 8-98) (Section 2, RR No. 17-03)

In case of sale/transfer of principal residence, the Buyer/Transferee shall
withhold from the seller and shall deduct from the agreed selling price
/consideration the 6% capital gains tax which shall be deposited in cash
or manager’s check in interest-bearing account with an Authorized Agent
Bank (AAB) under an Escrow Agreement between the concerned Revenue
District Officer, the Seller and the Transferee, and the AAB to the effect that
the amount so deposited, including its interest yield, shall only be released
to such Transferor upon certification by the said RDO that the proceeds of
the sale/disposition thereof has, in fact, been utilized in the acquisition or
construction of the Seller/Transferor’s new principal residence within
eighteen(18) calendar months from the date of the said sale or disposition.
The date of sale or disposition of a property refers to the date of
notarization of the document evidencing transfer of said property. In
general, the term “Escrow” means a scroll, writing or deed, delivered by
the grantor, promisor or obligor into the hands of a third person, to be held
by the latter until the happening of a contingency or performance of a
condition, and then by him delivered to the grantee, promisee or obligee.
(Section 2, RR No. 17-03)

After depositing the amount representing the six percent (6%) capital
gains tax as mentioned above, the Buyer/Transferee and the Seller, shall
jointly file, within thirty (30) days from the date of the sale or disposition
of the principal residence, with the Revenue District Office having
jurisdiction over the property, in duplicate, the Final Capital Gains Tax
Return (BIR Form No. 1706, or any form number assigned by the BIR),
covering the property bought with no computed tax due stating that the
supposed tax due/amount so withheld by the buyer is maintained in an
escrow account, which amount will be used to satisfy future tax liability, if
any, on the subject transaction. For purposes of capital gains tax
otherwise due on the sale, exchange or disposition of the principal
residence, the execution of the Escrow Agreement referred to in the
immediately preceding paragraph shall be considered sufficient. The tax
return so filed in pursuance hereof shall bear the addresses of both the
seller and the buyer. (Section 2, RR No. 17-03)

If within thirty (30) days after the lapse of the aforesaid 18-month period,
the Seller/Transferor fails to submit documentary evidence showing that
he has utilized the proceeds of sale or disposition of his old principal
residence to acquire/construct his new principal residence, he shall be
treated as deficient in the payment of his capital gains tax on the sale or
disposition of his aforesaid principal residence, and shall be accordingly
assessed for deficiency capital gains tax, inclusive of penalties and the 20%
interest per annum computed from the 31st day after the date of
sale/disposition of the said principal residence, pursuant to the provisions
of Section 228 of the Code, as implemented by Revenue Regulations No. 12-
99, in relation to Section 249 of the said Code. (Section 2, RR No. 17-03)

In the issuance of assessments, the seller shall receive all required notices
following existing procedures. Upon the time that the said deficiency tax
assessment has become final and executory, the deposit in escrow,
 inclusive of its interest earnings, shall be forfeited and applied against the
deficiency capital gains tax liability. If the same is insufficient to cover the
entire amount assessed, the Seller/Transferor shall remain liable for the
remaining balance of the assessment. On the other hand, the excess of the
deposit in escrow, if any, shall forthwith be returned to the Seller, by the
Bank upon written authorization from the Commissioner or his duly
authorized representative. (Section 2, RR No. 17-03)

(7) Gross income derived from contracts by subcontractors from service
contractors engaged in 'petroleum operations' as defined under P.D. 87
(also known as the 'Oil Exploration and Development Act') in the
Philippines — Eight percent (8%) of its gross income derived from such
contracts in lieu of any and all taxes, national and local, as imposed under
P.D. 1354. (Section 2, RR No. 6-01)

(8) Capital Gains from Sale of Shares of Stock Not Traded in the Stock
Exchange. - On the net capital gains realized during the taxable year from
the sale, barter, exchange or other disposition of shares of stock in a
domestic corporation - Fifteen percent (15%) (per Section 1 of RR No. 11-
2018, dated 15 March, retroactively effective to 01 January)