When is the appropriate time to withhold taxes according to the BIR?

According to the Bureau of Internal Revenue (BIR), thru Revenue Memorandum Circular No. 10-2018, the obligation to withhold taxes arises at the time an income payment is paid or payable, or the income payment is accrued or recorded as expense or asset, whichever is applicable in the payor’s books, whichever comes first.

Stated otherwise, the obligation to withhold taxes already arises when an expense or payable is already recorded in the books of the agency whether or not the same has been paid, pursuant to RR No. 12-2001.

In the case of government projects, the obligation to withhold taxes arises at the time the government agency books/records construction of PPE as Construction in Progress (CIP) with the appropriate asset classification since what RR No. 12-2001 mandates is “whichever comes first”.