BIR clarifies withholding tax rules for sales invoices

The Bureau of Internal Revenue (BIR) has clarified that businesses must show creditable withholding tax (CWT) as a separate item on covered sales invoices, rather than treating it as a discount or deduction from gross sales.

In Revenue Memorandum Circular No. 112-2026, issued on 22 October 2026, the bureau explained the implementation of Revenue Regulations No. 6-2026, which requires the separate presentation of withholding tax information on sales invoices.

The BIR said the rule does not introduce a new withholding tax or change existing tax rates. Instead, it aims to improve transparency and help businesses reconcile sales, collections, tax withheld and accounting records.

The requirement applies only to transactions in which the buyer or payor is legally required to withhold CWT. Whether a sale is business-to-business or business-to-consumer does not automatically determine whether withholding applies.

For covered transactions, sellers must indicate the full sales amount and list the applicable withholding tax separately. Acceptable labels include “Less: Withholding Tax,” “Less: Creditable Withholding Tax” and “Less: CWT.”

The bureau stressed that the withheld amount must not reduce gross sales, value-added tax-able sales or the VAT base, as it represents part of the payment arrangement between the buyer and seller rather than a reduction in the selling price.

The circular also provides transition periods for businesses updating their invoicing systems. Companies using computerized accounting systems, computerized books of accounts and software covered by mandatory electronic invoicing must comply by 31 December 2026, unless a later date is prescribed.

Existing point-of-sale systems and cash register machines not yet covered by mandatory electronic invoicing have until 31 March 2027 to comply, unless the BIR sets another deadline.

Businesses may continue using unused manual and loose-leaf invoices until supplies are exhausted, provided the required CWT details are added to covered transactions.