To be subject to expanded withholding tax, the income payment must be one of the items enumerated in the withholding tax regulations and must have been made to a person residing in the Philippines.

The assessment for expanded withholding tax (“EWT”) against the taxpayer includes an assessment for 2% EWT on freight, insurance and others based on Bureau of Customs (BOC) data. In ordering the cancellation of the assessment, the Court said that payments for freight and insurance in connection with importations are not among those which are subject to the 2% EWT. The said income payment of taxpayer was not made to any of the contractors mentioned in paragraph (E) of Section 2.57.2 of Revenue Regulations (RR) 2-98. In addition, the payments were made to entities not residing in the Philippines. Considering that the suppliers/payees are not residents of the Philippines, income payments to them are not subject to the EWT at 2% under Section 2.57.2 of RR 2-98, especially under paragraphs (M) and (N) which require that the pertinent supplier must be “local/resident”. (Isuzu Philippines Corporation vs. CIR, CTA Case No. 8025, December 11, 2012)