Commercial and Taxation Laws › Taxation Law › National Taxation (National Internal Revenue Code of 1997, as amended mainly by RA 10963, 11534, 11976, 12066, and 12214) › Income Tax › Withholding Taxes
iii. Duties of Withholding Agents
Timing of Withholding
Withholding tax shall be deducted and withheld by the withholding agent when the income payment is paid or payable or accrued or the income payment is accrued or recorded as an expense or asset, whichever is earlier.
Liability for Tax (Sec. 80).
(A) Employer. - The employer shall be liable for the withholding and remittance of the correct amount of tax required to be deducted and withheld under this Chapter. If the employer fails to withhold and remit the correct amount of tax as required to be withheld, such tax shall be collected from the employer together with the penalties or additions to the tax otherwise applicable in respect to such failure to withhold and remit.
B) Employee. - Where an employee fails or refuses to file the withholding exemption certificate or willfully supplies false or inaccurate information thereunder, the tax otherwise required to be withheld by the employer shall be collected from him including penalties or additions to the tax from the due date of remittance until the date of payment. On the other hand, excess taxes withheld made by the employer due to:
- Failure or refusal to file the withholding exemption certificate; or
- False and inaccurate information shall not be refunded to the employee but shall be forfeited in favor of the Government.
If the employer is the Government of the Philippines or any political subdivision, agency or instrumentality thereof, the return of the amount deducted and withheld upon any wage shall be made by the officer or employee having control of the payment of such wage, or by any officer or employee duly designated for the purpose. (Sec. 82)1
| FINAL WITHHOLDING TAX | CREDITABLE WITHHOLDING TAX |
| Amount of Tax Collected | |
| Full and final payment of the income due from the payee on the said income | Intended to equal or at least approximate the tax due from the said payee on the said income |
| Who is Primarily Liable | |
| Liability rests primarily on the withholding agent | Liability rests primarily on the taxpayer |
| Need to File a Return | |
| Payee is not required to file an income tax return for the particular income | Income recipient is still required to file an income tax return and/or pay the difference between the tax withheld and the tax due on the income. |
| Coverage | |
| All income subject to final taxes (i.e. passive income, gross income of NRA-NETB) Fringe benefit Informer’s reward to persons instrumental to the discovery of violations of the NIRC2 and the discovery and seizure of smuggled goods | Those income payments covered by EWT (Rev. Regs. 02-98)3Examples:Professional fees, talent fees, income payments to partners of GPP |
Exemptions Granted Under International Agreements
ii. In the determination of the minimum wage on a monthly basis, the withholding agent shall be guided by the prevailing minimum wage as reflected in the latest Matrix of Wage Order and its own policy on whether employees are (a) not considered paid on Saturdays and Sundays or rest days, (b) not considered paid on Sundays or rest days, (c) considered paid on rest days, special days and regular holidays, or (d) required to work everyday including Sundays or rest days, special days and regular holidays. The resulting number of days in the above enumerated categories are referred to as the factor or number of working/paid days in a year.
Substituted Filing
Individual taxpayers receiving purely compensation income, regardless of amount, from only one employer in the Philippines for the calendar year, the income tax of which has been withheld correctly by the said employer (tax due equals tax withheld) shall not be required to file an annual income tax return. The certificate of withholding filed by the respective employers, duly stamped 'received' by the BIR, shall be tantamount to the substituted filing of income tax returns by said employees. (Sec. 51-A)4
Who are not qualified for Substituted Filing?
The following individuals, however, are not qualified for substituted filing and therefore, still required to file Income Tax Return in accordance with existing regulations:
(A) Individuals deriving compensation from two or more employers concurrently or successively at any time during the taxable year.
(B) Employees deriving compensation income, regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e., tax due is not equal to the tax withheld) resulting to collectible or refundable return.
(C) Individuals deriving other non-business, nonprofessional-related income in addition to compensation income not otherwise subject to a final tax.
(D) Individuals receiving purely compensation income from a single employer, although the income tax of which has been correctly withheld, but whose spouse falls under Section 2.83.4(A), 2.83.4(B) and 2.83.4(C) of these regulations.
(E) Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income, or compensation income and other non-business, nonprofessional-related income. (Rev. Regs. 11-18)5
Authorities
- NIRC
- NIRC, Sec. 51-A
- NIRC, Sec. 82
- Rev. Regs. 02-98
- Rev. Regs. 11-18
- Rev. Regs. 11-18, Sec. 2