Withholding Tax (PART 2 – FINAL)



After we have understood the general principle of withholding tax, in this article, we will be giving you more information about types of withholding tax.

Let us give an example. For the business of rental of properties, a “lessee” has a duty to pay a rental fee. This income is called “rent” which is the assessable income tax, category 5. The lessee is called “payer” (one that pays an expense). Another party is an owner or a person who takes care the property or, a “lessor” who has a duty to receive the rent. The lessor is called “receiver”. This person is, therefore, has an income and has a duty to pay tax according to the law. We divide the withholding tax between these persons into 4 cases as follows;

Case 1: Non-juristic person as a payer (one that pays an expense) and non-juristic person as a receiver (one that has income and has a duty to pay tax)

In this case, the payer and the receiver are both non-juristic persons. The law specifies that the payer does not have a duty to withhold the tax from the income. This means the payer does not withhold the income tax.

Case 2: Non-juristic person as a payer (one that pays an expense) and juristic person as a receiver (one that has income and has a duty to pay tax)

In this case, the payer is a non-juristic person and the receiver is a juristic person. The law specifies that the payer does not have a duty to withhold the tax from the income. This means the payer does not withhold the income tax.

Case 3: Juristic person as a payer (one that pays an expense) and non-juristic person as a receiver (one that has income and has a duty to pay tax)

In this case, the payer is a juristic person and the receiver is a non-juristic person. The law specifies that the payer has a duty to withhold the tax 5% from the income. This means the payer withholds the income tax 5%.

Case 4:  Juristic person as a payer (one that pays an expense) and juristic person as a receiver (one that has income and has a duty to pay tax)

In this case, the payer is a juristic person and the receiver is a juristic person as well. The law specifies that the payer has a duty to withhold the tax 5% from the income. This means the payer withholds the income tax 5%.

The payer has a duty to file the withholding income tax return or P.N.D. 53 within 1st-7th of the next month from the month you pay the income. Moreover, the payer should have an evidence of withholding the tax from the income or “Non - Resident Withholding Tax Certificate” to give it to a recipient of the income (a person who has an income). The receiver should keep such document carefully for a tax deduction in case the tax withheld is more than the tax liability.

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