WITHHOLDING AGENTS: WHO THEY ARE AND THEIR OBLIGATIONS - ARTE - 2024

The withholding agents are all individuals or entities that have the legal obligation to receive, control, arrange, preserve or pay any item of income of a person or entity that is subject to withholding.

That is, they are agents legally appointed by local tax authorities and / or issuers to withhold withholding taxes on your behalf. The government of a country, as a precept to collect a tax in advance, has appealed to the figure that has been called withholding at source.

Source: pexels.com

This figure refers to the fact that each time a transaction is made that is subject to a tax, a withholding is made for an established amount, for the concept of said tax.

As a general rule, the withholding must be made by the person or entity that makes the payment. This provided that the entity to which the withholding is made is a taxpayer of the tax that causes the withholding.

In addition, the concept that gives rise to the withholding is effectively a concept that is subject to the withholding.

Who are the withholding agents?

The withholding agents are the natural or legal persons who obtain income from the first category, provided that the total amount of income received is classified within this category.

By mandate of law they are obliged to withhold taxes that concern the taxpayers with whom transactions are carried out.

It can be a partnership, individual, association, corporation, trust, or any other entity, including any foreign partnership, foreign intermediary, or branch of certain foreign banks and insurance companies.

If any withholding agent determines, in its sole discretion and in good faith, that it is required to withhold taxes, then such withholding agent may withhold. You must also timely pay the full amount of taxes withheld to the corresponding government authority, according to law.

Depending on the type of tax they collect, the following withholding agents can be appointed:

Value added tax (VAT) withholding agents

These agents are those taxpayers (legal or natural persons) who are legally authorized to use the change of VAT subject. For this reason, they obtain the aptitude of VAT withholding agents.

In this way, they take responsibility for the tax obligation on the retention, declaration and payment of the corresponding taxes.

Income tax withholding agents

These agents are those taxpayers (legal and natural persons) who by law are obliged to withhold a portion of the income that they grant to third parties.

Investment funds and public law entities are withholding agents. Also disability and retirement pension funds, securities funds, organized communities and temporary unions.

Similarly, companies and other legal or natural persons, de facto partnerships and illiquid successions, which by their offices intervene in operations or acts in which they must, by express legal order, make the corresponding withholding of the tax.

Industry and Commerce Tax Withholding Agents

There are also withholding agents for the industry and commerce tax. Each jurisdiction has its own tax statute and therefore has its own regulation in relation to withholding agents.

However, in most cases they agree with the income tax withholding agents. In this way, if an entity is a withholding agent for income tax, then it is most likely that it is also withholding tax on industry and commerce.

Obligations

A withholding is required at the time the payment of an amount subject to such withholding is made. It is defined that a payment is made to a person if that person receives income. This regardless of whether or not there is an actual transfer of cash or other property.

That is, a payment is considered to be made to a person if it is paid for the benefit of that person.

For example, a payment made to a creditor of a person to satisfy that person's debt to the creditor is considered to have been made to the person.

A payment is also considered made to a person when it is made to that person's agent.

The withholding agents also have the commitment to file the affidavit for the amounts withheld in a given business year during the corresponding period of each tax year.

Withholding tax

As a withholding agent, you are responsible for any tax that must be withheld. This responsibility is independent of the fiscal responsibility of the person to whom the payment is made.

If it is not withheld and the beneficiary does not meet their tax obligation, then both the withholding agent and the person are liable for the taxes. Likewise of the interests and applicable penalties.

The applicable tax will be collected only once. If the person complies with their tax obligation, the withholding agent can still be held liable for interest and penalties for not withholding it.

Present the withholding declaration at the source

All withholding agents are required to file the income tax return monthly. The amounts that you have withheld in the month concerned will be indicated there.

The tax statute indicates that the withholding agent will not have to file a return in the monthly periods in which they have not made withholdings at source.

Deposit withholdings

Obviously, the withholding agent will have to deposit with the Tax Office the amount of the withholdings that he has made.

It is not enough that only the withholdings made are declared. You also have to pay them, in addition to filing withholdings.

The obligation to deposit the withholdings that are made is very important. If this is not done, the declaration of withholding at source will be considered useless.

Issue certificates

The withholding agent has the obligation to send to the taxpayers who have had a withholding tax, the respective certificates in which the concept, the applied rate and the withheld value are recorded.

This is an important obligation. This is because the taxable person is required to have such certificates in order to deduct from their tax all the withholdings that have been made. Failure to do so will expose the withholding agent to a penalty, as prescribed by law.

The sending of such certificates must also comply with the requirements required by law.

References

1. IRS (2019). Withholding Agent. Taken from: irs.gov.
2. Law Insider (2019). Definition of Withholding Agent. Taken from: lawinsider.com.
3. Eco-Finance (2019). Withholding Agents. Taken from: eco-finanzas.com.
4. Gerencie (2019). Withholding agents. Taken from: gerencie.com.
5. Get Updated (2017). Withholding agents, who has this quality? Taken from: actualicese.com.