RMC No. 79-2026: How Suppliers Qualify for the 0.5% Withholding Tax Rate on Wholesale Goods

Revenue Memorandum Circular (RMC) No. 79-2026 clarifies how a Top Withholding Agent (TWA) applies the 0.5% preferential creditable withholding tax rate under RR No. 24-2025 when buying goods intended for wholesale from a manufacturer or direct importer — instead of the standard 1% rate that otherwise applies to local goods purchases. The circular defines who qualifies, which product categories are covered, and what suppliers must show to support the lower rate.

This post is part of the BIR Form 2307 series. For the base TWA rate rules this circular clarifies, see BIR Form 2307 for Purchases of Goods: Top Withholding Agent 1% Rate Explained and Who Is a BIR Top Withholding Agent?.

What problem is RMC No. 79-2026 solving? #

Since RR No. 24-2025 introduced a 0.5% preferential rate for certain wholesale goods, TWAs have had to decide case by case whether a given supplier and purchase actually qualify for it instead of the standard 1% goods rate. RMC No. 79-2026, issued by the BIR in July 2026, responds to that uncertainty by spelling out, in more operational terms, who counts as a qualifying supplier and which goods count as “intended for wholesale” — so withholding agents apply the correct ATC and rate the first time, rather than correcting BIR Form 2307 certificates after the fact.

Who qualifies as a preferential-rate supplier? #

A supplier qualifies for the 0.5% rate if it is a manufacturer or a direct importer of the covered goods — it does not need to be both. RMC No. 79-2026 clarifies this “either/or” reading of RR No. 24-2025: a local company that only imports (without manufacturing) can still qualify, and a domestic manufacturer that does not import can still qualify, as long as the goods sold fall within the covered categories and are sold for wholesale rather than at retail.

Which goods are covered? #

RMC No. 79-2026 identifies four wholesale product categories eligible for the 0.5% rate, carried over from RR No. 24-2025 and clarified in the circular:

A purchase of goods outside these four categories — even from a manufacturer or importer — stays at the standard 1% TWA rate under ATC WC158/WI158. The 0.5% rate is an exception tied to the product category, not a general discount for buying from a manufacturer.

What do suppliers need to show? #

RMC No. 79-2026 requires suppliers to substantiate their manufacturer or direct-importer status before a TWA applies the 0.5% rate instead of the standard 1%. The circular sets out documentary conditions suppliers must meet to support the lower rate — in practice, this means a TWA’s accounts payable and tax teams should not apply 0.5% automatically just because an invoice mentions one of the four covered categories; they should confirm the supplier’s status against the circular’s requirements first, since applying 0.5% to a non-qualifying supplier understates the withholding tax and exposes the withholding agent to deficiency assessment. Businesses handling high volumes of these purchases should review the full text of RMC No. 79-2026 on the BIR website with their tax adviser before changing AP withholding settings.

Worked example: correctly applying the exception #

A TWA buying pharmaceutical products from a verified manufacturer withholds 0.5%, not 1%, cutting the amount withheld in half compared to a standard goods purchase.

A hospital-supply distributor classified as a TWA buys ₱500,000 (VAT-exclusive) worth of pharmaceutical products directly from the manufacturer for onward wholesale distribution:

The distributor issues BIR Form 2307 reflecting the 0.5% rate only after confirming the supplier meets RMC No. 79-2026’s manufacturer/direct-importer and documentation conditions — not from the product category alone. If the same goods were instead bought from a reseller that is neither the manufacturer nor a direct importer, the standard 1% rate applies.

Frequently asked questions #

What does RMC No. 79-2026 clarify? #

RMC No. 79-2026 clarifies how Top Withholding Agents apply the 0.5% preferential creditable withholding tax rate under RR No. 24-2025 on purchases of goods intended for wholesale, defining which suppliers and product categories qualify and what documentation supports the lower rate.

Does a supplier need to be both a manufacturer and a direct importer to qualify for 0.5%? #

No. RMC No. 79-2026 clarifies that the supplier only needs to be a manufacturer or a direct importer of the covered goods — not both — to qualify for the 0.5% rate.

Which goods qualify for the 0.5% wholesale withholding tax rate? #

Per RMC No. 79-2026, the covered categories are completely built unit (CBU) and semi-knocked down (SKD) motor vehicles, motorcycles, pharmaceutical products, and solid or liquid fuels, when sold by a manufacturer or direct importer for wholesale.

What rate applies if a purchase doesn’t qualify for the wholesale exception? #

A Top Withholding Agent applies the standard rates under RR No. 24-2025: 1% on local purchases of goods (ATC WC158/WI158) and 2% on local purchases of services (ATC WC160/WI160). The 0.5% rate applies only to the specific wholesale goods categories from a qualifying manufacturer or direct importer.

Where does RMC No. 79-2026 fit relative to RR No. 24-2025? #

RR No. 24-2025, issued September 25, 2025, set the current creditable withholding tax rate structure for Top Withholding Agents, including the 0.5% preferential rate. RMC No. 79-2026, issued in July 2026, is a circular that implements and clarifies that regulation — it does not change the rates themselves.

Summary #

RMC No. 79-2026 doesn’t create a new rate — it clarifies how the existing 0.5% preferential rate under RR No. 24-2025 actually applies: the supplier must be a manufacturer or direct importer (either, not both) of motor vehicles, motorcycles, pharmaceutical products, or fuel intended for wholesale, and must support that status with documentation the circular specifies. Everything outside that narrow lane stays at the standard 1% goods / 2% services TWA rates. Before changing how AP applies EWT on a supplier, confirm the goods and the supplier both fit the circular’s categories — see BIR Form 2307 for Purchases of Goods and Who Is a BIR Top Withholding Agent? for the surrounding rules.