Transcript Slide 1


WITHHOLDING TAX ON
COMPENSATION
(Revenue Regulations No. 2-98, as amended)
Presented by:
MS. LILYBETH A. GANER, CPA, MBA
Revenue Officer
Assessment Division
Compensation Income Defined

Compensation means all remuneration
for services performed by an
employee for his employer under an
employee-employer
relationship
unless exempted by the Code.
Exemptions (cont…)
1.

Remunerations received
employment, as follows:
as
an
incident
of
(a) Retirement benefits received under RA No.
7461
and under a reasonable private benefit plan
(b) Benefits received due to death, sickness or other
physical disability or for any cause beyond the control
of the said official or employee
Exemptions (cont…)

(c)
Social
security
benefits,
retirement
gratuities, pensions and other similar benefits
received by residents, non-resident citizens
and resident aliens
Exemptions (cont…)

(d) Payments of benefits due or to become due to any
person residing in the Philippines under the
law of the United States administered by the
United States Veterans Administration;
(e) Payments of benefits made under the Social
Security System Act of 1945, as amended; and
(f) Benefits received from the GSIS Act of 1937, as
amended, and the retirement gratuity received by
government officials and employees.
Exemptions (cont…)

2. Remuneration paid for agricultural labor.
3. Remuneration for casual labor not in the
course of an employer’s trade or business.
4. Compensation for services by a citizen or
resident of the Philippines for a foreign
government or an international organization.
Exemptions (cont…)
5. Damages

6. Life insurance
7. Amount received by the insured as a
return of premium
8. Compensation for injuries or sickness
9. Income exempt under treaty
Exemptions (cont…)

10. Remuneration for domestic services
11. GSIS, SSS, Medicare and other
contributions (HDMF and Union
Dues)
Exemptions (cont…)

12. Thirteenth(13th) Month Pay and Other Benefits not
exceeding P 30,000
Other Benefits such as
 Christmas bonus
 Productivity
 Loyalty Award
 Gifts in cash or in kind
 Other benefits of similar nature
 Excess over the prescribed ceiling of the “de
minimis benefits”
Exemptions (cont…)

13. Compensation income of MWEs who
work in the private sector and being paid
the Statutory Minimum Wage applicable to
the place where he is assigned.
Latest Minimum Wage per RR 5-2011

in Region XI :
P 286.00 + 5.00 – Non-Agricultural Sector
P 276.00 + 5.00 – Agricultural Sector
(effective January, 2012; Additional P5.00 on May 1)

The following compensation received by
minimum wage earners shall likewise be
exempt from income tax:
 holiday pay
 overtime pay
 night shift differential pay
 hazard pay
Exemptions (cont…)

(14)
Compensation income of employees in the
public sector with compensation income of not
more than the SMW in the non-agricultural sector,
as fixed by RTWPB/NWPC, applicable to the
place where he is assigned.
Take note!

who
 An employee
receives additional
compensation other than SMW, holiday pay,
overtime, hazard pay, and night shift
differential pay such as:
Commissions
Honoraria
Fringe benefits
Taxable allowances
And other taxable income
shall not enjoy the privilege of being a MWE.
Hazard Pay

 the amount paid by the employer to MWEs
 Actually assigned to danger or strife-torn areas
 Disease-infested places
 Distressed or isolated stations and camps
which exposed them to great danger or contagion
or peril to life
Any hazard pay paid to MWEs which does not satisfy
the above criteria is deemed subject to IT and
consequently to WT.
DE MINIMIS BENEFITS
(As amended by RR 5-2011)

a.) Monetized unused vacation leave credits of private
employees not exceeding 10 days during the year;
b.) Monetized value of vacation and sick leave credits
paid to government officials and employees;
c.) Medical cash allowance to dependents of employees,
not exceeding p750 per employee per semester or
P125/month
DE MINIMIS BENEFITS

d) Rice subsidy of P1,500 or 1 sack of 50 kg rice per
month amounting to not more than P 1,500;
e.) Uniform and clothing allowance not exceeding
P4,000/ annum;
f.) Actual medical assistance, e.g. medical allowance to
cover medical and healthcare needs, annual
medical/executive check-up, maternity assistance,
and routine consultations, not exceeding P10,000
per annum;
DE MINIMIS BENEFITS

g.) Laundry allowance not exceeding P300 per month
h.) Employees achievement awards,
e.g., for length of service or safety achievement,
which must be in the form of tangible personal
property other than cash or gift certificate, with
an annual monetary value not exceeding P10,000
received by the employee under an established
written plan which does not discriminate in favor
of highly paid employees;
DE MINIMIS BENEFITS

i.) Gifts given during Christmas and major
anniversary celebrations not exceeding P5,000
per employee per annum;
j.) Daily meal allowance for overtime work and
night/graveyard shift not exceeding 25% of
basic minimum wage on a per region basis.
DE MINIMIS Rules

 “DE MINIMIS BENEFITS” conforming to the
ceiling shall not be considered in determining
the P 30,000
 the excess over the respective ceilings shall be
considered as part of the “other benefits” and
the employee receiving it will be subject to tax
only on the excess over the P30,000.
the application for registration should
be accomplished by both employer and
employee relating to the following:

(A)Employee:

Name/TIN, address & more as indicated in
form 1902
Status– single, married, others
If married:
 Status of spouse - name/TIN
- employed, abroad, ETB,
unemployed
Qualified dependents
 Name, date of birth of QDC

Claimant of exemption for QDC
 Husband, wife if Husband is
unemployed
NRC, income from foreign sources
WAIVES HIS RIG HT TO CLAIM
EXEMPTION for all children and
attach the sworn declaration to his
1902 and that of his wife’s
Required forms and attachments:

 birth certificate
 marriage contract if married
 birth certificate of QDC certified by Local
Civil Registry/ NSO ( if not applicable, any
doc. issued by a gov’t office)
 certificate of employment if Husband works
abroad

sworn declaration and waiver of right to
claim exemptions of QDC ( Annex “F” )
 medical cert of QDC, if incapacitated
 court decision of legally adopted
children
 death certificate
 other documentary evidence
Concurrent multiple employments:
 Shall file 1902 to his primary employer and
furnish copy to his secondary employer/s

Successive multiple employment:

furnish his new employer with form 2305 (Cert. of
Update of Exemption and of Employer’s and
Employee’s Information)
previous employer’s name, address, TIN
And date of separation
attach form 2316 (Cert. of compensation
payment/ tax withheld) for
compensation payment with or without
w/holding tax for the CY issued by prev.
employers.
Mixed Income

 Individual with mixed income shall first deduct the
allowable personal and add’l exemptions from
compensation income, only the excess there from
can be deducted from business/prof. income
(B) EMPLOYER:
accepts the 1902 filed by the new hired, indicate the
date of receipt, accomplish part V (employer’s name,
add, TIN, and other relevant infos.)
Procedures for filing 1902:
.Employee shall file
w/in 10 days upon
employment

1902
(triplicate)
2305
(w/in 10 days
after change of
status)
RDO
(w/in 30
days after
receipt)
Duplicate –
Employer

Original RDO
File
copy
Triplicate –
Employee
File
copy
Employer:
review ,
compute,
withheld &
apply
exemptions
In case the husband waives his right to exemption:
HAccomplish
“Annex F”
3 copies

1902
W- employer:
Deduct on the mo Hemployer Stopped
deducting
Employer of
Hacknowledge
OriginalW’s
employer
Triplicateemployee
Duplicate
Hemployer
Stop
deducting
Failure to file 1902:

 Zero exemption shall be applied based on the revised
withholding tax table
Failure to file 2305:
 employer shall withhold based on reported personal
exemptions existing prior to change
Salient Features
 Sec. 22 Definition

‘statutory minimum wage’ shall refer to the rate
fixed by the Regional Tripartite Wage and
Productivity Board, as defined by the Bureau of
Labor and Employment Statistics (BLES) of the
Department of Labor and Employment (DOLE).
Computation of wages

 The basis of the computation of the minimum
wage rates prescribed by law shall be the normal
working hours – not more than 8 hours a day.
 The computation of wages shall be in accordance
with the Collective Bargaining Agreement (CBA),
if any or the provisions of the Labor Code as
implemented

FACTOR OR NUMBER OF
WORKING/PAID
DAYS IN A YEAR
1. For those who do not work and are not considered
paid on Saturdays and Sundays or rest day

Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 261
days
12 months
Where 261 days
247113261-
ordinary working days
regular holidays
Special days
Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthly Rate=
P 291.00 x 261 days
12 months
P 6,329.25
2. For those who do not work and are not considered
paid on Sundays or rest day

Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 313 days
12 months
Where 313 days
299113313-
ordinary working days
regular holidays
Special days
Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthy Rate=
P 291.00 x 313 days
12 months
P 7,590.25..25
3. For those who do not work but are considered paid
on rest days, special days and regular holidays

Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 365
days
12 months
Where 365 days
299- ordinary working days
11- regular holidays
52 – Sunday/Rest days
3- Special days
365- Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthy Rate=
P 291.00 x 365 days
12 months
P 8,851.25
4. For those who are required to work everyday
including Sundays or rest day, special days & regular
holidays:

Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 261 days
12 months
Where 392.5 days
299 22 67.6 3.9
392.5 -
ordinary working days
regular holidays
52 rest days x 130%
- Special days
Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthly Rate=
P 291.00 x 392.5 days
12 months
P 9,518.13
Sec. 2.79. (B) Computation of
Withholding tax

(1) Withholding tax table
(a) Old table (effective January 1, 2006)
- January 1 to July 5, 2008
(b) Revised Transitory Withholding tax Table
- July 6 to December 31, 2008
(c) Revised Withholding tax Table
- January 1, 2009 & beyond
Use of WTax Table

 Four Tables for monthly, semi-monthly, weekly, and daily
 Each tax table is grouped into Tables A and B
 A for employees with no QDC
 B for employees with QDC
 1st column – exemption status
 2nd column – amount of exemption in pesos
 Columns 1 to 8 – reflect the portion of the amount of taxes
 Z – for zero exemption
 S – single
 ME – married employee
 Numerals – 1 to 4 represents the number of dependents
Steps to determine the amount of tax
to be withheld
1.

Determine the total monetary and non-monetary
compensation.
 -13th month pay
 -Productivity incentives
 -Christmas Bonus
 -other benefits
 -GSIS/SSS etc
2. Segregate the taxable from non-taxable compensation
income paid to an employee for the payroll period.
 -P30,000 ceiling
 -non-taxable retirement benefits / separation pay
Steps to determine the amount of tax
to be withheld

(3.)Segregate the taxable compensation income
determined in step 2 into regular taxable
compensation income and supplementary
compensation.
Regular compensation – basic salary, fixed
allowances for representation, transportation and
other allowances
Supplementary compensation – commission,
overtime pay, taxable retirement pay, taxable
bonus and other taxable benefits
Steps……..

(4) Use the appropriate tables
(5) Fix the compensation level using the regular
compensation income.
(6) Compute the withholding tax due.
Right to claim WT exemption

An employee receiving compensation income
shall be entitled to w/tax exemptions,
provided he/she must file
1902 – Application for registration
2305 – Cert.of Update of Exemption and
of Employer’s and Employee’s
Information
PERSONAL AND ADDITIONAL
EXEMPTION

Single
50,000
Married
50,000
Qualified dependent child
25,000
On exemptions

Every employer should ascertain whether or not
a child being claimed is a qualified dependent
If TP should have additional exemption during
the taxable year, he may claim the corresponding
additional exemption in full for such year
If the TP dies during the taxable year, the estate
may claim the full exemptions as if he died at the
close of the year
On exemptions

TP may still claim full exemptions during the
taxable year on the following cases:
Spouse or any of the dependent dies
Any of such dependents marries
Becomes 21 y.o.
Becomes gainfully employed
As if it occurred at the close of such year
Illustration

(1) Mr. Sy, single with no dependent receives
P12,000(net of SSS/GSIS, PHIC, HDMF employee share
only) as monthly regular compensation and P5,000 as
supplementary compensation for January, 2011 or a
total of P17,000.
Compute for the Withholding tax for Jan. 2011.
Computation
Regular compensation

P 12,000.00
Less : compensation level(line A-2 column 5)
10,000.00
Excess
2,000.00
Add: Supplementary compensation
5,000.00
7,000.00
Tax on P10,000
Tax on excess (P7,000 x 20%)
Withholding tax for Jan. 2011
708.33
1,400.00
P 2,108.33
Applicable Wtax Table
Monthly
1
Exemption
Status
0.00
0% over
2
0.00
+5%
3

41.67
+10%
over
4
5
208.33
+15%
over
6
7
8
1,875
4,166.67
10,416.67
A. Table for employees without qualified dependent
1. Z
0.0
1
0
833
2,500
5,833
11,667
20,833
41,667
15,833
25,000
45,833
Let’s Check:
Withholding tax – Jan. 2011

Withholding Tax (Feb.- Dec.11) 1,108.33 x 11
Total
Gross Income
Exemption – Single
= P 2,108.33
12,191.63
P14,299.66
P149,000.00
50,000.00
Taxable Income
P 99,000.00
Tax due
P 14,300.00
Tax Table

Over
But not
over
Of excess
over
Amount rate
Not over
10,000.00
5%
10,000.00
30,000.00
P500 + 10%
10,000.00
30,000.00
70,000.00
2,500 + 15%
30,000.00
70,000.00
140,000.00
8,500 + 20%
70,000.00
140,000.00
250,000.00
22,500 + 25%
140,000.00
250,000.00
500,000.00
50,000 + 30%
250,000.00
500,000.00
over
125,000 + 32%
500,000.00
Illustration:

(2) For the month of January 2011, Mrs. A, married with one
qualified dependent child, with basic salary equivalent to the
SMW, receives P 7,460.00 (P 286/day x 313 days/ 12) as
statutory monthly minimum wage plus other compensation
such as:
Commission……………….. . P 10,000
Transportation allowance…..
2,000
Hazard Pay………………….
1,000
Overtime……………………
5,000
Night shift differential……
2,000
Computation:
Statutory Minimum Wage
Gross Benefits
Hazard pay
P 1,000.00
Overtime
5,000.00
Night Shift Differential
2,000.00
Sub-total
Taxable compensation
commission*
P 10,000.00
Transportation*
2,000.00
Total Taxable Compensation Income
P 7,460.00

Regular compensation
P
Less: Compensation Level (B-1 col3)
Excess
P
Add: Supplementary compensation(8,000+12,000)
Total
P
8,000.00
P 15,460.00
12,000.00
P 27,460.00
7,460.00
7,083.00
377.00
20,000.00
20,377.00
Continuation…..

Tax on P7,083 (Line B1, col. 3)
Tax on excess (P20,377 x 10%)
Withholding tax – January 2011
P
41.67
2,037.70
P 2,079.37
*An employee who receives compensation other than
SMW, OT, NS differential, HPay shall no longer enjoy the
privilege of being a minimum wage earner, and his entire
earnings are no longer considered exempt.
ILLUSTRATIVE PROBLEM

For taxable year 2010, WTD Service Company employed
Mr. J, married with two qualified dependent children.
He received the following compensation for the year:
 Basic Monthly Salary
 Overtime Pay for Nov.
 Thirteenth Month Pay
 Other Benefits
 Withholding Tax
P 45,000.00
5,000.00
45,000.00
12,000.00
98,082.00
COMPUTATION:
Received
Non-
For the Year
Taxable
Basic Salary (P45K x 12)
Taxable
540,000.00
540,000.00
Overtime (Nov.)
5,000.00
5,000.00
13th Month Pay
45,000.00
Other Benefits
12,000.00
Totals

602,000.00
30,000.00
12,000.00
30,000.00
Total Gross Compensation
Less:Personal exemption
Additional exemption (2 x P25k)
15,000.00
572,000.00
572,000.00
50,000.00
50,000.00
100,000.00
Net Taxable Compensation
472,000.00
Tax Due (using the Income Tax Table)
116,600.00
Less: Tax Withheld from previous months(Jan-Nov)
98,082.27
Tax to be collected in Dec 2010
18,517.73
Liability for Tax

Employer
Responsible for withholding and remittance
of correct amount of tax
Employee
Responsible for submission of 1902 / 2305
Statements and Returns
 BIR Form 2316

Employer shall furnish the employees NLT Jan. 31
Failure to furnish shall be a ground for mandatory audit
upon verified complaint of the payee
It shall include the fringe benefits given to rank & file
employees
Employers of MWEs are still required to issue BIR Form
2316 (June 2008 Encs version)
It shall indicate the health &/or hosp. insurance, if any
The amount of SMW, OT, Holiday pay, Night diff, and
hazard pay shall be indicated
Among others
Statements and Returns

 Form 2316 cont….
 It shall be signed by both the employer’s authorized
representative and the employee
 Shall contain a written declaration that it is made
under the penalties of perjury
 Shall contain a certification that the employer’s
filing of BIR Form 1604-CF shall be considered as
substituted filing
 The employer shall retain the duly signed 2316 for a
period of three (3) years.
Statements and Returns

 Form 2316 continued…
 The applicable box for MWEs shall be indicated
(under the enhanced form). This serves as proof of
financial capacity for purposes of loans, etc…
 In case of successive employment during the
taxable year, an extra copy of BIR Form 2316 shall
be furnished to his new employer
Year-End Adjustment
PURPOSE:

 TAX DUE = TAX WITHHELD
WHEN:
 On or before the end of the calendar year, prior to the
payment of compensation for the last payroll.
 If terminated, on the day on which the last payment of
compensation is made.
YEA-Annualized Method
STEP 1 -

Determine
the taxable regular and
supplementary compensation paid to the
employee for the entire calendar year;
STEP 2 - If the employee has previous employment/s
within the year, add the amount of taxable
compensation paid to the employee by the
previous employer.
YEA-Annualized Method

STEP
3
-
Deduct from the aggregate amount of
compensation computed in Step 2 the amount
of the total personal and additional exemptions
of the employee;
Personal Exemptions:
Single P50,000
Married
P50,000
Additional Exemption:
P25,000 for each qualified dependent
YEA-Annualized Method

STEP 4 - Deduct the amount of premium payments on
Health and/or Hospitalization Insurance of
employees who have presented evidence
that they have paid the same during the
taxable year.
Note:
The deductible amount shall not exceed
P2,400/annum or P200/month whichever is
lower and total family gross income does not
exceed P250,000 for the calendar year.
YEA-Annualized Method

STEP 6 - Determine the deficiency or excess, if any,
of the tax computed in Step 5 over the
cumulative tax already deducted and
withheld since the beginning of the
current calendar year.
Annualized Withholding Tax - Formula

Gross Compensation (prev. + present)
Less:Non-Taxable/Exempt Compensation
a)13th month pay & other benefits
b)Other non-taxable benefits
c)SSS, GSIS, PHIC, Pag-ibig and
Union Dues (Employees share only)
Less: a) Personal and additional exemption
b) Health/Hosp. Premium payment
Taxable Compensation Income
Tax due
xxx
xxx
xxx
xxx
xxx
Pxxx
xxx
xxx
xxx
xxx
xxx
INCOME TAX TABLE
OVER BUT NOT OVER
OVER
Not over
10,000
30,000
70,000
140,000
250,000
500,000
10,0000
30,000
70,000
140,000
250,000
500,000
over

AMOUNT RATE OF EXCESS
5%
500 + 10%
10,000
2,500 + 15%
30,000
8,500 + 20%
70,000
22,500 + 25%
140,000
50,000 + 30%
250,000
125,000 + 34%
500,000
33% in 1999
32% in 2000 and thereafter
BASIC CONCEPT OF
YEAR -END ADJUSTMENT

Compensation Income-net
Less: Exemption (single)
Taxable Income
Tax Due
Less: Tax Withheld Jan-Nov
EVEN
PAYABLE
REFUNDABLE
Compensation Income-net
A
B
C
230,000
230,000 230,000
50,000
50,000
50,000
180,000
180,000 180,000
32,500
32,500
32,500
32,500
30,000
34,500
0__
2,500
(2,000)
Sample Problem 1

Mr. Dexter, head of the family with a
qualified
dependent
brother
receives
P12,166.67 (net of SSS, Philhealth, HDMF) as
monthly regular compensation starting
January 1, 2011, he filed his resignation
effective June 30, 2011. The tax withheld
from January to May was P2,900.
Computation:

Total compensation (Jan. - June)
Less: Personal Exemption
Net Taxable Compensation
P73,000.00
50,000.00
P23,000.00
Tax Due
Tax Withheld from Jan. to May
To be refunded on or before 6/30/02
P 1,800.00
2,900.00
(P1,100.00)
Sample Problem 2

Mr. Jacob, married with 2 qualified
dependent children received P18,500 monthly
compensation (net of SSS, Philhealth, HDMF
employees contributions). Taxes withheld
from Jan. to Nov. were P8,158.00.
Computation:

Total Compensation (Jan - Nov)
Add: Dec. compensation
Gross Compensation
Less: Personal/additional exemption
Total Compensation
Tax due
Less: Tax Withheld
Collectible W/tax for Dec. salary
P203,500.00
18,500.00
P222,000.00
150,000.00
P 72,000.00
P 8,900.00
8,158.00
P 742.00
Annual Information Return

 Manual Submission - 3 copies of 1604CF/1604E
Including the alphalist of employees and income
payees.
 Diskette/CD & email Submission thru
[email protected]
Individuals qualified for substituted filing
and must not file BIR Form No. 1700
1. Receiving purely compensation income regardless of amount;
2. Working for only one employer in the Philippines for the calendar year;
3. Income tax has been withheld correctly by the employer (tax due
equals tax withheld);
4. The employee’s spouse also complies with all the three conditions
stated above, and
5. Employer filed to BIR the Annual Information Returns on Income
Taxes Withheld (BIR Form 1604-CF).
Note:
All of the above requisites must be present. The Annual Information
Return
of Income Taxes Withheld on Compensation and Final Withholding Taxes
(BIR Form No. 1604-CF) filed by their respective employers duly stamped
“Received”, shall be tantamount to the substituted filing of income tax
returns by said employees.
TMD
Seminar on Annualized Withholding Tax (Year-End Adjustment) and Substituted Filing (BIR Form 1700)
SF 200 Slide 2
Annual Information Return

 What to use:
WAGES
1604CF
+ alphalist
EXPANDED
1604 E
+ alphalist
 When to submit:
On or before
Jan. 31 ff year
on or before
March 1 ff year
 Where to submit:
RDO
RDO
 Retention
3 yrs
same
Where to file?
B I R Revenue District Office
RDO 112- Tagum City
RDO 113- West Davao City
RDO 132- East Davao City
RDO 114- Mati City
RDO 115-Digos City
Reiteration of the Applicable Penalties for
Employers Who Fail to Withhold, Remit, Do the
Year-End Adjustment and Refund Employees of
the Excess Withholding Taxes on Compensation
Objective:


Emphasize the Employers to:
1.
2.
3.
4.
Withhold
Remit
Do the Year-End Adjustment
Refund employees of the excess
of the Withholding Taxes on Compensation
Sec. 80(A); Sec. 79(H); Sec. 24(A)
Sec. 80(A) NIRC, as amended
Employer

Withhold & Remit
Correct amount of tax
BIR
 Sec. 79(H)

* On or before year end but prior to payment of the
compensation for the last payroll period, the employer
shall determine the tax due from each employee on
taxable compensation income for the entire taxable year
- Sec. 24(A).
*The difference of the tax due and tax withheld will
either be withheld on Dec. or refunded to the employee
not later Jan. 25, following year.
FORMS TO BE USED
For Monthly Remittance:

COMPENSATION ==> BIR Form 1601C
For Annual Information Return:
COMPENSATION &
FINAL
===> BIR Form 1604CF
For Certificate of Taxes Withheld:
COMPENSATION ===> BIR Form 2316
Due Dates:

January to November– On or before the 10th day
of the following the month, whether W/A is
LT or Non-LT (RR 6-01)
December - On or before Jan. 15 of the following
year, whether W/A is LT or Non-LT (RR 6-01)
Annually - On or before Jan. 31 of the following
year (RR 3-02)
Attachments Required:
1.
2.
3.
4.
5.

Alphalist of Employees as of Dec. 31 with No Previous
Employer within the Year;
Alphalist of Employees as of Dec. 31 with Previous
Employer(s) within the year;
Alphalist of Employees Terminated before Dec. 31;
Alphalist of Employees Whose Compensation Income
are Exempt from Withholding Tax but Subject to
Withholding Tax
Alphalist of Employees other than Rank & File Who
Were Given Fringe Benefits During the Year
Effectivity of Substituted
Filing

* Optional for taxable year 2001
* Mandatory effective taxable year 2002
START
Preparation of BIR
Form No. 1604 CF
Before Jan. 31
Employer files w/
BIR the duly accomplished
BIR FORM 1604CF
Subject to WTC?
On or before Jan 31
n
Employer shall issue
2306to the payee (FWT)
On or before Jan. 31
y
Entitled to substituted filing?
n
Employer shall issue
2316 to employee
y
Employer/employee to execute sworn
joint certification. Employer to furnish
employee copy of 2316/cert. to employee.
Employer to retain copy of joint cert.
On or before Jan. 31
On or before April 15
Employee files ITR
together with 2316 &
other pertinent docs
Note:

An illustrative example on the year-end adjustment is
shown under Sec. 2.79(B)(5)(b) of Revenue Regulations
(RR) No. 2-98, as amended.
Failure to Comply

1. Non-withholding of tax
- Employer fails to withhold the tax
2. Underwithholding
- Employer fails to correctly withhold the tax
3. Non-remittance
-Employer fails to remit total amount withhled
4. Underremittance
-Employer’s remittance is less than total amount
withheld

5. Late remittance
-Employer remits correct amount withheld beyond the
due date
6. Failure to refund excess taxes withheld
 -Employer ails to refund excess taxes withheld to its
employees
Penalties for Non-Compliance:
1. Additions to the tax:

a. Sec. 248 – 25% of the amount due (failure)
50% of the amount due (fraud)
b. Sec. 249 – 20% interest per annum
c. Sec. 251 – other penalties + total tax not withheld
d. Sec. 252 - penalties + refundable amount
2. Criminal Liabilities: (upon Conviction)
a. Sec. 255 – other penalties + P10,000 +
imprisonment of 1 yr to 10 yrs

b. Sec. 256 – (Corp.) penalties + fine of P50,000 to
P100,000
c. Sec. 272 – (Public Officers) penalties + fine of P5000
to P50,000 or imprisonment of 6 mos.
to 2 yrs, or both
d. Sec. 275 – (no specific penalty) fine of <P1,000 or
imprisonment of < 6 mos. Or both
Note:

In certain instances as provided
under Revenue Memorandum Order No.
19-2007, a compromise penalty in lieu of
criminal liability may be imposed and
collected.

 The end