BIR RMC No. 112-2026: New Rules on Creditable Withholding Tax in Sales Invoices and Compliance Deadlines
Executive Summary
The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular (RMC) No. 112-2026, clarifying how businesses should present Creditable Withholding Tax (CWT) in their sales invoices.
The Circular provides guidance on implementing Revenue Regulations (RR) No. 006-2026, which requires CWT to appear as a separate item in an invoice when the transaction is subject to withholding tax.
Importantly, businesses are not required to show CWT on every invoice. The requirement applies only when the buyer or payor is legally required to withhold tax.
The BIR also allows businesses to continue using existing unused invoices and provides transition periods for updating computerized accounting systems, POS systems, and other invoicing software.
For business owners, accountants, and finance teams, understanding these rules is essential to avoiding invoicing errors and maintaining proper tax compliance.
What Is BIR RMC No. 112-2026?
RMC No. 112-2026 clarifies the requirements for separately presenting Creditable Withholding Tax in sales invoices under RR No. 006-2026.
Creditable Withholding Tax is income tax deducted by a buyer or payor from certain payments and remitted to the BIR on behalf of the seller or income recipient.
Under the new invoicing requirements, the applicable CWT must be clearly identified in the invoice instead of being treated as a discount or reduction in sales.
The purpose is to make invoices more transparent and help businesses properly reconcile sales, collections, withholding taxes, and accounting records.
When Must CWT Appear in a Sales Invoice?
The BIR clarifies that CWT must appear as a separate invoice item only when the particular transaction is subject to creditable withholding tax.
This distinction is important because not all business transactions are subject to withholding.
For example, a sale to another business does not automatically require CWT. The buyer must actually be required to withhold under the applicable tax rules.
Similarly, ordinary retail transactions involving consumers who are not withholding agents generally do not require a CWT amount.
The Circular identifies a specific exception involving sales of real property classified as an ordinary asset to individuals.
The key rule: CWT depends on the nature of the transaction and the buyer's withholding obligation not simply whether the transaction is B2B or B2C.
Step-by-Step Guide to Complying With the New CWT Invoice Requirements
Step 1: Determine Whether the Transaction Is Subject to CWT
Before preparing the invoice, the buyer or payor must determine whether withholding tax applies.
This includes identifying the applicable income-payment classification, withholding tax rate, tax base, and amount to be withheld.
The buyer should communicate the relevant withholding information to the seller before the invoice is finalized.
Step 2: Show CWT Separately in the Invoice
If the transaction is subject to CWT, the seller must issue an invoice showing the full sales amount and the applicable withholding tax as a separate item.
The BIR allows the following descriptions:
Less: Withholding Tax
Less: Creditable Withholding Tax
Less: CWT
The invoice should also reflect the resulting net amount payable.
CWT must not be treated as a discount or deducted from gross sales, VATable sales, or the applicable VAT base.
Step 3: Continue Using Existing Unused Invoices
Businesses do not automatically need to discard their remaining manual invoice booklets.
Under the transitory provisions, existing unused manual and loose-leaf invoices may continue to be used until fully consumed.
When a transaction is subject to CWT, the seller must stamp, print, or legibly write the required CWT description and amount on the invoice before issuance, including the original and duplicate copies.
For transactions not subject to CWT, no stamp or CWT amount is required.
Businesses are also not required to obtain a new Authority to Print (ATP) solely because their existing invoice layout does not contain a CWT field.
However, manual and loose-leaf invoices printed under an ATP issued after the effectivity of RR No. 006-2026 must include a separate CWT line item.
Step 4: Update Computerized Invoicing Systems
Businesses using CAS, POS, CRM, or other invoicing software must ensure that their systems can properly capture and display CWT information.
The prescribed CWT description and field must form part of the applicable registered or accredited system configuration.
When CWT does not apply, the field may remain blank or indicate "N/A" or "0.00."
The system must also preserve the relevant withholding information and maintain an audit trail of changes.
Importantly, the BIR distinguishes between Limited System Changes and Material System Changes.
A modification made solely to accommodate the CWT requirements may qualify as a Limited System Change, provided it does not materially affect core system functions.
Such a change does not automatically require a new system registration, although applicable notification or reporting requirements may still apply.
More substantial changes affecting system architecture, invoice numbering, security, or other core functions may require additional BIR approval before implementation.
Important Compliance Deadlines
RMC No. 112-2026 provides different transition periods depending on the invoicing system used.
Invoicing system | Compliance period |
CAS/CBA and other software covered by mandatory electronic invoicing | Generally December 31, 2026, or a later prescribed date |
Existing POS and other systems not yet covered by mandatory electronic invoicing | March 31, 2027, unless another date is prescribed |
Existing Cash Register Machines (CRM) | March 31, 2027, unless another date is prescribed |
Existing unused manual and loose-leaf invoices | May continue until fully consumed, subject to the transitory requirements |
For covered electronic invoicing systems, the Circular contemplates the required CWT functionality beginning January 1, 2027, or a later applicable date.
Important clarification: Section III(B)(7.1) of the uploaded Circular contains an apparent inconsistency: one line refers to December 31, 2025, while the succeeding provisions refer to January 1, 2027. The table above reflects the apparent intended December 31, 2026 transition, consistent with the cited electronic invoicing framework, but businesses should verify the deadline against official BIR clarification before relying on it.
The transition periods also do not mean that businesses can ignore CWT presentation requirements in the meantime. Where CWT applies, the prescribed temporary method must be followed until the system is updated or the applicable transition period expires.
Risks and Penalties for Non-Compliance
Failure to properly reflect CWT in an invoice may expose the seller to non-compliance findings under the applicable BIR invoicing regulations.
However, RMC No. 112-2026 also recognizes that the seller may reasonably rely on withholding information provided by the buyer.
If the buyer fails to communicate accurate withholding information, the seller is not automatically liable solely because the CWT was omitted, unless the seller knew or reasonably should have known that withholding applied.
The buyer remains separately responsible for correctly determining, deducting, remitting, reporting, and certifying the withholding tax.
The Circular also clarifies that omission of CWT information does not, by itself, invalidate an otherwise compliant invoice or automatically disallow the buyer's input VAT or deductible expense when the other applicable requirements are satisfied.
Businesses should nevertheless avoid repeated invoicing errors because these may lead to compliance findings, reconciliation problems, and tax examination issues.
Practical Examples
Example 1: A Service Invoice Subject to CWT
ABC Consulting provides services worth ₱100,000, excluding VAT, to a corporate client.
Assume the transaction is subject to 2% CWT on the ₱100,000 tax base and 12% VAT applies.
The invoice may reflect:
Particulars | Amount |
Service Fee | ₱100,000 |
VAT (12%) | ₱12,000 |
Total Invoice Amount | ₱112,000 |
Less: CWT (2%) | ₱2,000 |
Net Amount Payable | ₱110,000 |
The CWT reduces the amount collected from the buyer but does not reduce the seller's gross sales or VATable sales.
The 2% rate is illustrative; the actual withholding rate must be determined under the applicable rules.
Example 2: Ordinary Retail Sale
A customer purchases groceries worth ₱2,500 for personal consumption.
The customer is not acting as a withholding agent, and the transaction is not subject to CWT.
The store may issue the invoice without indicating any withholding tax amount.
If the system already contains a CWT field, it may be left blank or marked "N/A" or "0.00."
Example 3: Existing Manual Invoice Without a CWT Field
A business still has unused, duly authorized invoice booklets that do not contain a separate CWT line.
For a transaction subject to CWT, the business may continue using the existing invoice and clearly stamp or write the required CWT description and amount before issuing it.
There is no need to discard the entire booklet solely because the CWT field is missing.
Example 4: Online Marketplace Withholding
An online merchant sells goods through an e-commerce platform that is required to withhold CWT from its remittance to the merchant.
The merchant issues the sales invoice to the customer for the full sale amount.
The platform's withholding is not deducted from the amount payable by the consumer.
Instead, the platform separately reflects the withholding in its settlement or remittance documentation and issues the applicable withholding tax certificate.
The merchant should not issue another sales invoice merely because it later receives the net remittance from the platform.
Frequently Asked Questions
1. Is CWT now required on every sales invoice?
No.
CWT must be shown as a separate item only when the transaction is actually subject to creditable withholding tax.
2. Do businesses need to replace all unused invoice booklets?
No.
Existing unused manual and loose-leaf invoices may continue to be used until fully consumed, subject to the prescribed transitory requirements.
3. Do all B2B transactions require CWT?
No. A business-to-business transaction is subject to CWT only when the buyer or payor is legally required to withhold tax.
4. Must businesses immediately register a new CAS or POS system to add the CWT field?
Not necessarily.
A modification limited to implementing the CWT requirements may qualify as a Limited System Change. Applicable notification or reporting requirements must still be observed.
5. What happens if CWT is determined only after the invoice was issued?
Under RMC No. 112-2026, the buyer must promptly communicate the withholding information. The seller must issue a BIR-registered Credit Memo reflecting the applicable CWT and referencing the original invoice.
The original invoice must be preserved and must not be erased, overwritten, canceled, or reused.
6. Does showing CWT in the invoice replace BIR Form 2307?
No.
The invoice's CWT information does not replace the applicable withholding tax certificate or other documentary requirements for claiming the tax credit.
Key Takeaway: Not Every Invoice Needs CWT, but Every Business Should Know When It Applies
RMC No. 112-2026 provides practical guidance for businesses adjusting to the new invoice presentation requirements.
The most important clarification is that CWT must be separately presented only when the particular transaction is subject to withholding tax.
The Circular also provides flexibility by allowing the continued use of existing unused invoices and transition periods for updating invoicing systems.
For businesses, early preparation is essential. Reviewing invoice layouts, coordinating with withholding agents, and assessing existing accounting software can help ensure compliance before the applicable deadlines.
Call-to-Action: Is Your Business Ready for the New BIR Invoice Requirements?
Aureada CPA Law Firm assists businesses with BIR compliance, computerized accounting system registration and updates, electronic invoicing requirements, and tax advisory services.
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