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REVENUE REGULATIONS NO.

2-98 (April 17, 1998) WITHHOLDING TAXES ON INCOME PAYMENTS, COMPENSATION AND CREDITABLE VAT AND PERCENTAGE TAXES These regulations will govern the collection of taxes at source. It will be applied on all income paid beginning January 1, 1998. Final and Creditable Withholding Tax Withholding taxes on income payments consist of two types: final withholding taxes and creditable withholding taxes. Under the final withholding tax system, the amount of tax withheld by the withholding agent represents the full and final payment of the income tax due from the recipient of income. Thus, the taxpayer is no longer required to file a tax return for the particular income, or to include such income as part of the taxable income that he will be reporting under in his annual income tax return. On the other hand, under the creditable withholding tax system, the income recipient is still required to file an income tax return to report the income and to pay the difference between the tax due on the income and the tax withheld, if any.

Withholding Agents These withholding taxes are required to be deducted from the payment due to the recipient of income. The following persons are constituted as withholding agents, and thus, must withhold the applicable taxes on certain income payments they make: a. Corporations, association, partnerships, non-profit organizations, cooperatives, and other entities registered with the Securities and Exchange Commission and other government agencies mandated to register such entities. a. An individual engaged in business. However, even individuals not engaged in business are required to withhold taxes when they buy real property. a. All government offices including government-owned or controlled corporations. The obligation of the withholding agent to deduct and withhold the tax arises at the time an income is paid or payable, whichever comes first. The term "payable" refers to the date the obligation becomes due, demandable or legally enforceable.

Remittance of Withholding Taxes to BIR The withholding agent must pay the creditable withholding taxes it has deducted with the Authorized Agent Banks (AAB) located within the Revenue District Office (RDO) having jurisdiction over its residence or principal place of business. The withholding tax return covering both creditable and final withholding taxes, must be filed and the taxes paid within 10 days after the end of each month, except for taxes withheld for December which should be filed on or before January 25 of the following year. However, the return for final withholding taxes on interest from bank deposits and yield or any other monetary benefit from deposit substitutes, trust funds and similar arrangements is required to be filed and the payment made within twenty five (25) days from the close of each calendar quarter. For taxpayers classified as Large Taxpayers, the filing of the return and the payment of tax should be made within twenty five (25) days after the end of each month. Payment must be made with the branch of the Land Bank of the Philippines or Development Bank of the Philippines located at the BIR National Office.

Liability of Withholding Agent The withholding agent will be liable for the withholding tax that should have been collected, together with the applicable penalties, i.e., the 25% surcharge and 20% interest on the total amount due. In addition, unless he pays such withholding taxes, his claim for the deductibility of such payments against his gross income will be disallowed.

Payments Subject to Final Withholding Tax The following forms of income will be subject to final withholding tax at the rates specified. Income Payment Interest from peso bank deposit Tax Rate 20% Payee * Citizen individual or resident alien

* Non-resident alien engaged in trade or business * Domestic corporation * Resident foreign corporation 25% * Non-resident alien not engaged

other winnings.000. prizes exceeding P10.5% * Resident individual citizen or alien * Non-resident corporation foreign * Domestic corporation * Resident foreign corporation Exempt * Non-resident alien * Non-resident corporation foreign alien Yield from deposit substitutes and trust funds. except PCSO and lotto winnings 20% * Citizen individual or resident * Non-resident alien engaged in trade or business * Domestic corporation * Resident foreign corporation 25% 34% in 1998. in general. royalties.in trade or business 34% in 1998. 33% in 1999 32% in 2000 and thereafter Interest income from a depository bank under the foreign currency deposit system 7. 33% in 1999. 32% in 2000 and thereafter * Non-resident alien not engaged in trade or business * Non-resident corporation foreign Royalties on books. other literary works and musical compositions 10% * Citizen individual or resident alien * Non-resident alien engaged in .

deposit substitutes based on the length of time instrument was held by taxpayer More than 5 yrs Exempt 4 to 5 yrs. . trust funds. exchange or other disposition of real property located in the Philippines classified as capital asset 6% on the gross selling price or fair market value. insurance or mutual fund companies or share in distributable net income of partnership 6% in 1998. . 8% in 1999 10% in 2000 and thereafter 20% 25% 34% in 1998. whichever is higher * Citizen or resident alien * Non-resident alien engaged in trade or business * Non-resident alien not engaged in trade or business * Domestic corporation * Non-resident alien engaged in trade or business * Non-resident alien not engaged in trade or business * Non-resident corporation foreign * Citizen individual or resident alien * Non-resident alien engaged in trade or business * Citizen individual or resident alien .12% Less than 3 yrs. .trade or business Interest income from longterm deposit or investment in savings. 32% in 2000 and thereafter Sale. joint stock company.20% Cash and/or property dividends from domestic corporation. 33% in 1999.5% 3 to less than 4 yrs.

charter and other fees Interest on foreign loans contracted on or after August 1. including local commercial banks.Compensation income. Gross income from all sources within the Philippines Gross rentals. lease and charter fees Gross rentals. machineries and other equipment Non-resident foreign corporation 4. and other FCDUs/OBUs Profit remitted by Philippine branch. except those registered with PEZA. branches of foreign banks.5% 7. 1986 Dividends from a domestic 10% FCDUs OBU 15% Head office of foreign corporation 25% Non-resident cinematographic film owners. except income subject to fringe benefit tax 15% Alien employees and Filipinos employees occupying the same position as those of alien employed by * Regional headquarters * Regional headquarters or area Operating * Representative offices * Offshore banking units * Foreign Petroleum Service Contractors and Sub-contractors Income derived from foreign currency transactions with residents. SBMA and CDA. lessors or distributors Non-resident owner of lessor of vessels from leases or charters to Filipino citizens or corporations Non-resident lessor of aircraft.5% 20% 15% Non-resident foreign corporation .

33% in 1999. 32% in 2000 and thereafter 25% 15% * Non-resident alien engaged in trade or business * Citizen individual or resident alien * Non-resident alien not engaged in trade or business Alien employees and Filipinos employees occupying the same position as those of alien employed by * Regional headquarters * Regional headquarters or area Operating * Representative offices * Offshore banking units * Foreign Petroleum Service Contractors and Sub-contractors Informer’s reward 10% Persons instrumental in the discovery of violations of Tax Code and discovery and seizure of smuggled goods Payments Subject to Creditable Withholding Tax Creditable withholding taxes will be applied on the following items of income payments made by persons residing in the Philippines: Income Payment/Payee Tax Rate .corporation Fringe benefits granted or furnished by the employer 34% in 1998.

whose duties are confined to attendance at and participation in the meetings of the board of directors. talent fees or other forms of remuneration to taxable juridical persons Rentals paid to lessors of real property used in business (Previous minimum lease of P5.000 was deleted. stage. lessors or distributors Gross payments to * General engineering contractors * General building contractors * Specialty contractors * Other contractors .) Cinematographic film rentals and other payments to resident individuals and corporate cinematographic film owners. demolition and salvage work contractors and operators of drilling apparatus 10% 5% 5% 5% 1% . promotional and talent fees for the services rendered by the following individuals * Individuals engaged in the practice of profession * Professional entertainers * Professional athletes * Directors in movies.Professional. radio. television and musical productions * Insurance agents and insurance adjusters * Management and technical consultants * Bookkeeping agents and agencies * Other recipients of talent fees * Fees of directors who are not employees of the company paying such fees. Professional fees.filling.

persons engaged in the sale of computer services. warehousing or forwarding establishments . insurance.advertising agencies . allowances. exchange or transfer of real 15% 5% 10% 10% .persons engaged in the installation of elevators. . computer machines and other equipment and machineries and maintenance services thereon.printers.independent producers of television. janitorial. lithographers and publishers . advances.independent producers of "jingles" . heat or power . stipends and other payments made by a general professional partnership to its partners Professional fees paid to medical practitioners by hospitals and clinics or by patients through the hospital or clinic Gross selling price or total amount of consideration for the sale. bookbinders.TV and radio blocktimers on sale of TV and radio commercial spots. air conditioning units.operators of dockyards . credit and/or collection agencies and other business agencies . except such income subject to final withholding tax and tax-exempt income Gross commissions to customs.persons engaged in the installation of water system.. landscaping services and collection and disposal of garbage . and gas or electric light. sharings.TV and radio station operators on sale of TV and radio airtime .operators of stevedoring.messengerial. Income distribution to beneficiaries of estates and trusts. radio and stage performances or shows . real estate and commercial brokers and fees of agents of professional entertainers Drawings. private detective and/or security agencies.labor recruiting agencies .transportation contractors .

000 but not exceeding P2 M More than P 2 Million b) Not habitually engaged in the real estate business 7.000 and below 15% 1. other than capital assets. natural or juridical person. except any single purchase which is P10. shipping and airline companies. In case the total creditable withholding taxes that were deducted during the year from the taxpayer exceed his income tax due for the year. showing the amount of his excess withholding tax credits. A written request therefor must be submitted to the BIR within two (2) years after the payment of the tax. corporation.5% 3. the excess creditable withholding taxes may a.5% Additional income payment to government personnel for overtime services from importers. trust fund or pension fund a) if habitually engaged in the real estate business P500.0% 5. He may request from the BIR for a cash refund or a tax credit certificate for use in payment of his other national internal revenue tax liabilities.000 or less More than P500. the taxpayer is required to submit with his income tax return a copy of the first page of his income tax return for the previous taxable period. by an individual.0% ½% 1% 1% Tax Credit or Refund The creditable taxes withheld from the income of a taxpayer are allowed as tax credit against his income tax liability in the quarter(s) of the taxable year in which the income (subjected to withholding tax) was earned or received.property. However. Automatically be applied as a credit against his income tax due for the taxable quarters/years immediately succeeding the taxable quarters/years in which the excess credit arose. trust.000 corporations to their local supplier of goods Income payments made by a government office on their purchases of goods from local suppliers. Such tax return must show that he has not opted for a cash refund or tax credit. representing sales of goods/services made to cardholders Income payments made by any of the top 5. at his option. or a. . estate. or their agents Gross amounts paid by credit card company to any business entity.

The name by which the payment for employee’s services is called is immaterial. deriving income from compensation for services rendered in the Philippines. except those which are subject to the fringe benefits tax Taxable pensions and retirement pay . Where the employee has chosen to have his compensation income subjected to withholding. Non-resident citizens are taxable only on their income derived from Philippine sources. managers and officers are considered as employees. including director’s fees if the director us at the same time an employee of the employer Taxable bonuses Fringe benefits. and hence. No distinction is made between classes or grades of employees. Thus. Wages.000 monthly or annual salary of P60. Compensation includes all remuneration for services performed by an employee for his employer under an employer-employee relationship.Withholding Tax on Compensation In general. or a. their income from sources outside the Philippines are not taxable. Allowances Commissions Fees. whichever is higher. not only as to the result to be accomplished. His compensation income would not be subject to a withholding tax but he will file his annual income tax. An employer-employee relationship exists when the person for whom the services were performed has the right to control and direct the individual who performs the services. employees whose total annual compensation does not exceed the statutory minimum wage of P5. An "employee" is an individual performing services under an employer-employee relationship. Emoluments and honoraria. His compensation income will be subjected to withholding tax. may exercise any of these options: a. Thus. he must execute a waiver in a prescribed BIR form of his exemption from withholding. Compensation Subject to Withholding All compensation paid to the employee is subject to withholding tax. not subject to withholding tax. Thus. whether citizens or aliens. the withholding of tax on compensation income will apply to all employed individuals. superintendents. the following terms are considered as compensation income: o o o o o o o o o Salaries.000. However. This would constitute as the authority for the employer to apply withholding tax on his compensation. but also as to the details and means by which such results are accomplished. but he would not be required to file the income tax return.

The retiring official or employee should not have previously availed of the privilege under the retirement benefit plan of the same or another employer. pensions and other similar benefits received by residents or non-resident citizens or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions.Remuneration for services is considered compensation even if the employer-employee relationship no longer exists at the time when the payment is made. 1. Thus. and d. Benefits received from the GSIS Act of 1937. not subject to withholding tax: 1. such as retrenchment. Payment of benefits under the law of the United States administered by the United States Veterans Administration. Payment of benefits made under the Social Security System Act of 1954. c. it is subject to withholding. Amounts received by reason of involuntary separation will be exempt from income tax even if the employee. The plan must be reasonable. private or public. 1. Retirement benefits received under Republic Act 7641 and those received by officials and employees of private firms under a reasonable private benefit plan maintained by the employer which meets the following requirements: a. retirement gratuities. at the time of separation. and thus. b. 1. The retiring official must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement. redundancy or cessation of business. 1. Remuneration paid for agricultural labor . had rendered less than ten (10) years of service and/or is below fifty (50) years of age. and the retirement gratuity received by government officials and employees. Social security benefits. 1. sickness or other physical disability or for any cause beyond the control of said employee. The benefit plan must be approved by the BIR. 1. Any amount received by an employee or by his heirs from the employer due to death. Exemption from Withholding Tax The following payments or benefits paid or provided by the employer are tax-exempt.

However. Income exempt under any treaty obligation binding upon the Philippine government 1. Advances or reimbursements for travelling. Remuneration paid for labor which is occasional. goodwill. 1. the services of household personnel furnished by the employer to an employee who is holding managerial or supervisory position. Computation of Withholding Tax . Remuneration paid for domestic services. SSS.000.1. incidental or irregular. Thus. shall be subject to the Fringe Benefits Tax. contentment or efficiency of his employees. Thirteenth (13th) month pay and other benefits such as Christmas bonus. representation and other ordinary and necessary expenses incurred by the employee in the performance of his duties. gifts and other benefits of similar nature to the extent that the total amount thereof does not exceed P30. 1. 1. interest payments agreed under the policy for the amounts which are held by the insured will be included in the gross income. loyalty awards. Actual. 1. Amounts received by the insured as a return of premium 1. the value of such benefits need not be included as part of compensation income. The excess of actual expenses over advances made shall be treated as taxable income if such amount is not returned to the employer. exemplary and nominal damages in connection with a final judgment or compromise agreement arising out of or related to an employer-employee relationship. if living quarters or meals are furnished to an employee for the convenience of the employer. moral. GSIS. 1. Facilities or privileges are of relatively small value which are offered or furnished by the employer merely as a means of promoting the health. Life insurance proceeds paid to the heirs or beneficiaries upon death of the employee. productivity incentive bonus. Compensation for injuries or sickness 1. Compensation for services by a citizen or resident of the Philippines for a foreign government or an international organization 1. if the employee is required to account/liquidate for said expenses. and does not promote or advance the employer’s trade or business 1. The monetized value of unutilized vacation leave credits of ten (10) days or less which were paid to the employee during the year. Medicare and Pag-ibig contributions and union dues of individual employees 1. However. 1.

1. to the tax on the excess of the total regular and . Regular compensation includes basic salary. Segregate the taxable compensation from the non-taxable income paid to the employee for the payroll period. fixed allowances for representation. 1. Hence. The taxable income refers to all remuneration paid to an employee not otherwise exempted by law from income tax. Compute the withholding tax due by adding the tax predetermined in the compensation level indicated at the top of the column. semi-monthly. Fix the compensation level as follows: i. Gross benefits in the amount of thirty thousand pesos (P30. 1. The following procedure is followed in computing for the amount of tax to be withheld: 1. Christmas bonus. The compensation level is the amount indicated in the line and column to which the regular compensation income is equal to or in excess. weekly. productivity incentives. Determine the column to be used by taking into account only the total amount of taxable regular compensation income. Withholding tax on compensation is due when the employer pays such compensation. weekly or daily.000) or less shall be exempted from income tax and from withholding tax.There is a prescribed table for computing the withholding tax on compensation. 1. the BIR has provided four (4) types of withholding tables that would suit the payroll period being followed by the employer . but not to exceed the amount in the next column of the same line. while the non-taxable income are those which are specifically exempted from income tax by the Tax Code or by other special laws. with the applicable rates depending on the range of compensation and the personal and additional exemptions that employee is entitled to. semi-monthly. segregating gross benefits which includes thirteenth (13th) month pay. Determine the line (horizontal) corresponding to the status and number of qualified dependent children using the appropriate symbol for the taxpayer status. and other benefits received by the employee per payroll period. transportation and other allowances paid to an employee per payroll period. i. and monthly. Segregate the taxable compensation income into regular taxable compensation income and supplementary compensation income. Determine the total monetary and non-monetary compensation paid to an employee for the payroll period.daily. Use the appropriate tables for the payroll period: monthly. 1. with or without regard to a payroll period. as the case may be. Supplementary compensation includes payments to an employee in addition to the regular compensation.

500 + 20% of the excess over P70. Compute the amount of tax on the difference in accordance with the following table: Not over P10. Annualization of Withholding Tax When the employer-employee relationship is terminated before the end of the year. whichever is lower) and that their family’s total gross income does not exceed P250. Over P70.000 but not over P30. 1.000……………….supplementary compensation over the compensation level. The BIR will prescribe in a separate regulation the documents to be presented to determine the aggregate of the employee’s family income. If the employee has previous employment/s within the year. add the amount of taxable regular and supplementary compensation paid to the employee by the previous employer. For this purpose. To compute for the final adjustment.000………………. 1. the following procedures will be observed: 1.000 but not over P140.000 P2.500 + 15% of the excess over P30.000 . 1.000 P8. Determine the total taxable regular and supplementary compensation paid to the employee during the year.000 for the calendar year. the employer should ask the employee to present the policy contract together with the original official receipt of the premium payment.400 or P200 per month.000……………… 5% P500 + 10% of the excess over P10. which is computed by multiplying the excess by the rate also indicated at the top of the column.. Deduct the amount of premium payments on health and/or hospitalization insurance of employees who have presented evidence that they have paid during the taxable year premium payments (the deductible amount shall not exceed P2. or at the end of the year. the employer is required to determine the amount of tax that still has to be withheld from the total compensation that he has paid to the employee. if any.000…………………………………… Over P10.000 but not over P70. Over P30. Deduct from the aggregate amount of compensation the amount of the total personal and additional exemptions of the employee. 1..

since the beginning of the current calendar year.000 in 1998. 33% in 1999. the excess shall be credited or refunded to the employee not later than January 25 of the following year.000 but not over P250. the employee must file the Application for Registration (BIR Form No. Determine the deficiency (or excess) of the tax computed over the cumulative taxes already deducted by the present employer and previous employer.000…………… Over P500.500 + 25% of the excess over P140. the employer shall be liable to pay the amount of tax which cannot be collected from the employee. To report changes in his exemption. Basic Personal exemption . In case the deficiency tax is more than the amount of last compensation to be paid. the employer is allowed to deduct the amount refunded from the remittable amount of taxes withheld from compensation income in the current month when such refund was made. 32% in 2000 and thereafter 1. if any. 1902) upon employment.000 + 34% of the excess over P500. 1998.000…………… Over P250. In order to receive the benefit of such exemptions.000 P50. If the tax withheld from the employee since the beginning of the year is more than the tax required to be withheld. Beginning January 1.Over P140. and in the succeeding months thereafter until the amount refunded by the employer is fully paid.000 + 30% of the excess over P250.000……………………………………… P22. Withholding Exemptions In the computation of the withholding tax due from compensation paid to an employee. the employer must consider the personal and additional exemptions that such employee is entitled to. each employee shall be allowed to claim the following amount of exemptions: 1.000 P125. In return. The employer and employee shall come to an agreement on how the amount advanced by the employer will be settled. 2305).000 but not over P500. he must file a Withholding Compensation and Exemption Certificate (Form No. The deficiency tax shall be deducted from the last payment of compensation for the calendar year.

The term also includes an unmarried or legally separated man or woman who is the benefactor of a qualified senior citizen. Thirty two thousand pesos (P32. are incapable of support because of mental or physical defect.000). he would still qualify as dependent. The husband is deemed as the proper claimant of the additional exemption. the total number of dependents for which an additional exemption can be claimed. Use of Withholding Taxes on Compensation Withholding taxes on compensation are creditable.000. A "head of family" refers to an unmarried or legally separated man or woman with a parent. must not exceed four (4). Twenty Five Thousand pesos (P25.For single individual or married individual judicially decreed as legally separated with no qualified dependents . where such brother or sister or child are not more than 21 years of age. However. illegitimate or legally adopted child who is chiefly dependent for support upon and living with the taxpayer. Where the spouse is unemployed or is a non-resident citizen deriving income from foreign sources.00) for each qualified dependent child. .00) For head of a family. unless he explicitly waives his right in favor of his wife. The employee is still required to report in his individual income tax return the compensation subjected to withholding by his employer as part of his gross income and.00). compute his total income tax liability. He is then allowed to claim as tax credit the withholding taxes deducted by his employer. A dependent may be a legitimate. unmarried and not gainfully employer. unmarried and not gainfully employed or. and pay only the remaining balance of the income tax. using this as basis. regardless of age. If mentally or physically handicapped. the employed spouse who is working in the Philippines shall automatically be entitled to claim the additional exemption for the children. He must be not more than 21 years of age.000.Twenty Thousand pesos (P20. brother or sister or legitimate or illegitimate. recognized naturally or legally adopted children living with and dependent upon him for their chief support. regardless of age. Additional Exemption for dependents A married individual or head of family shall be allowed an additional exemption of Eight Thousand pesos (P8. For each legally married individual. 2.000.

the employer is required to file with the BIR the Annual Information Return of Income Tax Withheld on Compensation (BIR Form No. On or before January 31st of the following year. Filing a return with the wrong BIR office . to any single employee must register by filing with the Revenue District Office where his legal residence or place of business is located an Application for Registration as withholding agent not later than ten (10) days after becoming an employer. which is not engaged in business in the Philippines. under an employer-employee relationship. However. formerly Form No.000 or more during the year. W-2). of whatever nature. on the day on which the last payment of compensation is made. is also considered as employer. together with an alphabetical list of employees.Liability of Employer An "employer" is a person for whom an individual performs or performed any service. Penalties for Non-compliance 1. A person paying compensation on behalf of a non-resident alien individual or foreign corporation. both in duplicate copies. taxes withheld from the last compensation for the year shall be paid to the BIR not later than January 25 of the succeeding year. Any person who expects to make payment of compensation in the amount of P60. The term also refers to the person having control of the payment of the compensation in cases where the person for whom the services were performed does not exercise such control. Failure to Withhold. The employer shall make a return and pay such tax on or before the 10th day of the month following the month in which the withholding was made to any AAB within the Revenue District Office where the employer’s place of business or legal residence is located. or P5. 1604). The certification must be issued to the employee on or before January 31 of the following year. the withholding taxes must be remitted on or before the 25th day of the following month. The amount of any tax withheld by the employer is a special fund held in trust for the government. a penalty equivalent to 25 per cent of the amount due shall be imposed in the following cases: a. or b. or if his employment is terminated before the close of the year.000 monthly. Failure to file any return and pay the tax due thereon as required under the Tax Code or regulations on the date prescribed. 2316. The employer is required to furnish every employee from whose compensation taxes have been withheld the Certificate of Income Tax Withheld on Compensation (Form No. For large taxpayers. In addition to the tax required to be paid. Every person who is required to withhold the tax from the compensation of an employee is liable for the payment of such tax to the BIR.

employer shall be liable for penalties and/or additions to the tax for failure to deduct and withhold the tax within the prescribed time. or before the date prescribed for its payment.c. d. Failure to refund excess tax withheld on Compensation. the employer shall subject to penalty of P1.Single/Legally Separated/Widow or widower with no dependent child/ Married/Head of Family Status of spouse of the employee Qualified dependents . However. Such liability stays even if the employee subsequently pays the tax. Failure to pay the full or part of the amount of tax shown on any return required to be filed. Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment. the employer will be fined not less than P10. Registration of Employees as Taxpayers Every employee is required to register as a taxpayer.000. statement or list. In addition. 3.000. the penalty to be imposed shall be 50% of the deficiency tax. the aggregate amount to be imposed for all such failures during a calendar year will not exceed P25. 2. interest shall be assessed and collected on any unpaid amount of tax at the rate of 20 percent per annum. or e. For every failure to file an information return. or such higher rate as may be prescribed for payment until the amount is fully paid. In such a case. he must accomplish the Application for Registration for Individuals Earning Compensation Income (BIR Form No. or keep any record or supply any information required. In addition.name and date of birth . in case any payment has been made on the basis of such return before the discovery of the falsity or fraud. Filing of Certain Information Return. or the full amount of tax due for which no return is required to be filed.000 and imprisoned of not less than one (1) year but not more than ten (10) years. In case of willful neglect to file the return within the period prescribed. For this purpose. 1902) with the following information:       Name Taxpayer’s Identification Number (TIN) Address Status of employee . Any employer who fails or refuses to refund excess withholding tax not later than January 25 of the succeeding year shall be liable to a penalty equal to the total amount of refunds which was not refunded to the employee. or in case a false or fraudulent return is willfully made.

However. the employer shall compute the withholding tax under the schedule for zero exemption. 1997 shall accomplish and file the application with their employers not later than April 30. registered name and other relevant information. In case the employee fails to update his Exemption Certificate. If an employee fails or refuses to file an Application for Registration. gross payments made by the government to sellers of goods and services would be subject to withholding to wit: Payments for purchases of goods Payments for services rendered Payments made to government public work contractors 3% 6% 8.5% . VAT due on sales of goods and services are not subject to withholding since the tax is not determinable at the time of sale. New employees shall accomplish and file the application within ten (10) days from the start of employment. All employees who have not filed the application for registration as of December 31. 1998. if applicable. the employer will withhold taxes based on the reported personal exemptions existing prior to the change of status. Claimant of exemption for children The following forms. Withholding of Creditable Value-added tax In general. are required to be attached to the application:           Marriage contract Court decision of legal separation Birth Certificate of each qualified dependent Certificate of employment of the husband if he is working abroad Waiver of exemptions of children by the husband in case wife is claiming the additional exemptions of the children Waiver from exemption on withholding tax of taxpayers whose total compensation income in a year does not exceed P60.000 Medical certificate of dependent if physically or mentally incapacitated Court decision of legal adoption of children Death certificate Current certificate of income tax exemption of qualified senior citizen The employer with whom the employee’s Application for Registration is filed must indicate the date when he received the form and accomplish Part V of the application pertaining to Employer’s information such as TIN. All applications must be transmitted by the employer to the Revenue District Officer where the employer has his legal residence or place of business within 30 days from receipt thereof.

commissions and discounts based on the remaining maturities of the instrumentShort-term (not exceeding 2 years) Medium-term (2 years .000 Grantees of franchise on electric.Payments for lease or use of property or property rights to non-resident owners 10% The withholding agents shall accomplish the Monthly VAT Tax declaration (BIR form 2550M) and pay the amount withheld with the authorized agent bank located within the Revenue District Office (RDO) having jurisdiction over the place where the government office is located. corporations.4 years) Rate 3% 3% 3% 3% 2% . except taxes withheld for the 3rd month of the quarter which would be remitted through a Quarterly VAT Tax return (BIR Form 2550Q) to be filed not later than the 25th day after the end of the calendar quarter. the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) in quadruplicate copies. partnerships and/or associations are subject to withholding at the following rates: Type of Income Payment/ Payee Persons exempt from VAT for the reason that their annual gross sales or receipts do not exceed P550. The first three copies will be given to the seller not later than the 15th of the following month.000 Domestic carriers and keepers of garages International air and shipping carriers Grantees of franchise on radio and or television broadcasting companies whose annual gross receipts of the preceding year does not exceed P10. The withholding agent is required to furnish each seller of goods and services from whom taxes has been deducted. while the fourth copy will be retained by the withholding agent. offices and instrumentalities of the government to private individuals. gas and water utilities Banks and non-bank financial intermediaries a) On interest. Withholding of Percentage Taxes on Government Money Payments Money payments made by bureaus. The return shall be filed and payments made within ten (10) days following the end of the month the withholding was made.

Long-term maturity 4 years .4 years) Long-term maturity 4 years . profits from exchange and other gross income 5% 3% 1% 0% 0% 5% Finance companies and other financial intermediaries not performing quasi-banking functions a) On interest. night and day clubs c) boxing exhibitions d) professional basketball games e) jai-alai and racetracks 18% 18% 10% 15% 30% 5% 10%/5% 5% 3% 1% 0% 5% . lessee or operator of a) Cockpits b) cabarets.7 years Over 7 years Life insurance companies Agents of foreign insurance companies Proprietors. discounts and other items of gross income paid to finance b) On interest. rentals of property.7 years Over 7 years b) On dividends c) On royalties. commissions and discounts paid from their loan transactions based on the remaining maturities of the instruments: Short-term (not exceeding 2 years) Medium-term (2 years .

No penalties will be imposed until May 15. . 1998. 1998 for non-compliance of these regulations that implement new provisions of the Code.33 1/3% Over 33 1/3% Taxes deducted and withheld will be covered by the Monthly Return of Internal Revenue Taxes withheld on Government Money payments (BIR Form 1600) which should be filed and payments made within ten (10) days following the end of the month the withholding was made. Effectivity The regulations shall be applicable to compensation income paid beginning January 1.Sale. barter or exchange of shares of stock listed and traded through the local stock exchange ½ of 1% on the gross selling price 4% 2% 1% Shares of stock sold or exchanges through initial public offering Not over 25% 25% .