Disallowance of expenses not subjected to withholding tax

Disallowance of expenses not subjected to withholding tax 
(Revenue Regulations No. 12-2013)

Pursuant to Section 2.58.5 of Revenue Regulations No. 2-98,  expenses not properly subjected to withholding taxes shall not be allowed as deductible expense for income tax purposes.  However, if the withholding tax, including interest and surcharges,  is paid at the time of audit and investigation, the deduction may still be allowed 

Not anymore.

According to RR 12-2013, no deduction shall be allowed on expenses  even if the withholding tax  due on the failure to withhold on the income payment is made  during the course of the BIR examination.  Thus, if the BIR discovers upon audit  that the required withholding tax on the income payment made was not paid, the concerned taxpayer shall be liable to pay the deficiency withholding tax (including interest and surcharge) and the deficiency income tax as a result of the  disallowed deduction.   

RR 12-2013 was published on July 13, 2013 and 15 days hence, shall be effective on July 28, 2013.