2 98 PDF

April 17, 1998
REVENUE REGULATIONS NO. 02-98
SUBJECT : Implementing Republic Act No. 8424, "An Act Amending

the National Internal Revenue Code, as Amended" Relative to
the Withholding on Income Subject to the Expanded
Withholding Tax and Final Withholding Tax, Withholding of
Income Tax on Compensation, Withholding of Creditable
Value-Added Tax and Other Percentage Taxes
TO : All Internal Revenue Officers and Others Concerned
Pursuant to Sec. 244 of the National Internal Revenue Code, as amended,

in relation to Sections 57 to 59 , Sections 78 to 83 , Section 114(C) and
Sections 116 to 127 of Republic Act 8424, these regulations are hereby
promulgated which shall govern the collection at source on income paid on or after
January 1, 1998 and prescribing the Revised Withholding Tax Tables on
compensation.
SECTION 2.57. Withholding of Tax at Source. —
(A) Final Withholding Tax. — Under the final withholding tax system the
amount of income tax withheld by the withholding agent is constituted as a full and
final payment of the income tax due from the payee on the said income. The liability
for payment of the tax rests primarily on the payor as a withholding agent. Thus, in
case of his failure to withhold the tax or in case of underwithholding, the deficiency
tax shall be collected from the payor/withholding agent. The payee is not required to
file an income tax return for the particular income. LLpr
The finality of the withholding tax is limited only to the payee's income tax
liability on the particular income. It does not extend to the payee's other tax liability
on said income, such as when the said income is further subject to a percentage tax.
For example, if a bank receives income subject to final withholding tax, the same
shall be subject to a percentage tax. cdasia
Copyright 2019 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2019 1
(B) Creditable Withholding Tax. — Under the creditable withholding tax
system, taxes withheld on certain income payments are intended to equal or at least
approximate the tax due of the payee on said income. The income recipient is still
required to file an income tax return, as prescribed in Sec. 51 and Sec. 52 of the
NIRC, as amended, to report the income and/or pay the difference between the
tax withheld and the tax due on the income. Taxes withheld on income payments
covered by the expanded withholding tax (referred to in Sec. 2.57.2 of these
regulations) and compensation income (referred to in Sec. 2.78 also of these
regulations) are creditable in nature.
SECTION 2.57.1. Income Payments Subject to Final Withholding Tax. —

The following forms of income shall be subject to final withholding tax at the rates
herein specified:
(A) Income payments to a citizen or to a resident alien individual:
(1) Interest from any peso bank deposit, and yield or any other
monetary benefit from deposit substitutes and from trust funds and
similar arrangements; royalties (except on books, as well as other
literary and musical compositions), prizes (except prizes
amounting to Ten thousand pesos [P10,000] or less which shall be
subject to tax under Subsection (A) of Section 24 of the Tax
Code, as amended); and other winnings (except winnings from
Philippine Charity Sweepstakes and lotto amounting to P10,000
or less which shall be exempt) derived from sources within the
Philippines — Twenty percent (20%).
(2) Royalties on books, as well as other literary works and musical

compositions — Ten percent (10%).
(3) Interest income received by an individual taxpayer from a

depository bank under the Foreign Currency Deposit System —
Fifteen percent (15%).
(4) Interest income from long-term deposit or investment in the form

of savings, common or individual trust funds, deposit substitutes,
investment management accounts and other investments evidenced
by certificates in such form prescribed by the Bangko Sentral ng
Pilipinas which was pre-terminated by the holder before the fifth
(5th) year at the rates herein prescribed to be deducted and
withheld from the proceeds thereof based on the length of time that
the instrument was held by the taxpayer —
Holding Period Rate
Four (4) years to less than five (5) years 5%

Three (3) years to less than four (4) years 12%
Less than three (3) years 20%
(5) Cash and/or property dividends actually or constructively received

from a domestic corporation, joint stock company, insurance or
mutual fund companies and regional operating headquarters of
multinational companies, or on the share of an individual in the
distributable net income after tax of a partnership (except general
professional partnership) of which he is a partner, or on the share
of an individual in the net income after tax of an association, a
joint account or a joint venture or consortium taxable as a
corporation of which he is a member or a co-venturer — Ten
percent (10%). prLL
(6) On capital gains presumed to have been realized from the sale,
exchange or other disposition of real property located in the
Philippines, classified as capital assets, including pacto de retro
sales and other forms of conditional sales based on the gross
selling price or fair market value as determined in accordance with
Sec. 6(E) of the Code (i.e., the authority of the Commissioner
to prescribe real property values), whichever is higher — Six
percent (6%).
In case of sale on installment of real property classified as

capital asset, the procedures stated under Sec. 2.57.2(J) hereof on
the sale of real property classified as ordinary asset shall apply
with the exception that the withholding tax on the former shall be
final whereas that on the latter shall be creditable.
In case of dispositions of real property classified as capital

asset by individuals to the government or any of its political
subdivisions or agencies or to government-owned or controlled
corporations, the tax to be imposed shall be determined either
under Section 24(A) of the Code for the normal rate of income tax
for individual citizens or residents or under Section 24(D)(1)
of the Code for the final tax on the presumed capital gains from
sale of property at six percent (6%), at the option of the
taxpayer-seller.
In case of sale/transfer of principal residence, the

Buyer/Transferee shall withhold from the seller and shall deduct
from the agreed selling price/consideration the 6% capital gains tax
which shall be deposited in cash or manager's check in
interest-bearing account with an Authorized Agent Bank (AAB)
under an Escrow Agreement between the concerned Revenue
District Officer, the Seller and the Transferee, and the AAB to the
effect that the amount so deposited, including its interest yield,
shall only be released to such Transferor upon certification by the
said RDO that the proceeds of the sale/disposition thereof has, in
fact, been utilized in the acquisition or construction of the
Seller/Transferor's new principal residence within eighteen (18)
calendar months from date of the said sale or disposition. The date
of sale or disposition of a property refers to the date of notarization
of the document evidencing the transfer of said property. In
general, the term "Escrow" means a scroll, writing or deed,
delivered by the grantor, promisor or obligor into the hands of a
third person, to be held by the latter until the happening of a
contingency or performance of a condition, and then by him
delivered to the grantee, promisee or obligee.
After depositing the amount representing the six percent

(6%) capital gains tax as mentioned above, the Buyer/Transferee
and the Seller, shall jointly file, within thirty (30) days from the
date of the sale or disposition of the principal residence, with the
Revenue District Office having jurisdiction over the property, in
duplicate, the Final Capital Gains Tax Return (BIR Form No.
1706, or any form number assigned by the BIR), covering the
property bought with no computed tax due stating that the
supposed-tax due/amount so withheld by the buyer is maintained
in an escrow account, which amount will be used to satisfy future
tax liability, if any, on the subject transaction. For purposes of the
capital gains tax otherwise due on the sale, exchange or disposition
of the said Principal Residence, the execution of the Escrow
Agreement referred to in the immediately preceding paragraph
shall be considered sufficient. The tax return so filed in pursuance
hereof shall bear the addresses of both the seller and the buyer.
If within thirty (30) days after the lapse of the aforesaid
18-month period, the Seller/Transferor fails to submit documentary
evidence showing that he has utilized the proceeds of sale or
disposition of his old principal residence to acquire/construct his
new principal residence, he shall be treated as deficient in the
payment of his capital gains tax on the sale or disposition of his
aforesaid Principal Residence, and shall be accordingly assessed
for deficiency capital gains tax, inclusive of penalties and the 20%
interest per annum computed from the 31st day after the date of
sale/disposition of the said principal residence, pursuant to the
provisions of Section 228 of the Code, as implemented by Revenue
Regulations No. 12-99, in relation to Section 249 of the said Code.
In the issuance of assessments, the Seller shall receive all

the required notices following existing procedures. Upon the time
that the said deficiency tax assessment has become final and
executory, the deposit in escrow, inclusive of its interest earnings,
shall be forfeited and applied against the deficiency capital gains
tax liability. If the same is insufficient to cover the entire amount
assessed, the Seller/Transferor shall remain liable for the
remaining balance of the assessment. On the other hand, the excess
of the deposit in escrow, if any, shall forthwith be returned to the
Seller, by the Bank upon written authorization from the
Commissioner or his duly authorized representative.
(7) Gross income derived from contracts by subcontractors from

service contractors engaged in 'petroleum operations' as defined
under P.D. 87 (also known as the 'Oil Exploration and
Development Act') in the Philippines — Eight percent (8%) of its
gross income derived from such contracts in lieu of any and all
taxes, national and local, as imposed under P.D. 1354.
(8) Capital Gains from Sale of Shares of Stock Not Traded in the
Stock Exchange. — On the net capital gains realized during the
taxable year from the sale, barter, exchange or other
disposition of shares of stock in a domestic corporation —
(B) Income Payment to Non-resident Aliens Engaged in Trade or Business in

the Philippines. — The following forms of income derived from sources within
the Philippines shall be subject to final withholding tax in the hands of a non-resident
alien individual engaged in trade or business within the Philippines, based on the
gross amount thereof and at the rates prescribed therefor:
(1) On Certain Passive Income — A tax of twenty (20%) percent is

hereby imposed on certain passive income received from all
sources within the Philippines.
(a) Cash and/or property dividend from a domestic corporation

or from a joint stock company, or from an insurance or
mutual fund company or from a regional operating
headquarter of a multinational company;
(b) Share in the distributable net income after tax of a

partnership (except general professional partnership) of
which he is a partner, or share in the net income after tax of
an association, a joint account, or a joint venture of which
he is a member or a co-venturer;
(c) Interests from any currency bank deposit and yield or any
other monetary benefit from deposit substitutes and from
trust funds and similar arrangements;
(d) Royalties (except royalties on books, as well as other

literary works and musical compositions which shall be
subject to 10% final withholding tax);
(e) Prizes (except prizes amounting to ten thousand pesos

(P10,000.00) or less subject to tax under Sec. 25 (A) (1)
of the Code for the normal rates of income tax for
individuals) and other winnings (except Philippine Charity
Sweepstakes winnings and lotto winnings);
(2) Interest income derived from long-term deposit or investment in

the form of savings, common or individual trust funds, deposit
substitutes, investment management accounts and other
investments evidenced by certificates in such form prescribed by
the Bangko Sentral ng Pilipinas which was pre-terminated by the
holder before the fifth (5th) year at the rates herein prescribed to be
deducted and withheld from the proceeds thereof based on the
length of time that the instrument was held by the taxpayer —
Holding Period Rate
Four (4) years to less than five (5) years 5%

Three (3) years to less than four (4) years 12%
Less than three (3) years 20%
(3) On capital gains presumed to have been realized from the sale
Sec. 6(E) of the Code (i.e. the authority of the Commissioner to
prescribe zonal values), whichever is higher — Six percent (6%).


under Sec. 24(A) of the Code for the normal rate of income tax for
individual citizens or residents or under Sec. 24(D)(1) of the Code
for the final tax on the presumed capital gains from sale of
property at six percent (6%) at the option of the taxpayer-seller.
(4) Gross income from all sources within the Philippines derived by
non-resident cinematographic film owners, lessors or distributors
— Twenty Five percent (25%).
For purposes of these regulations, the term 'cinematographic

film' includes motion picture films, films, tapes, discs and other
such similar or related products.

Stock Exchange. — On net capital gains realized during the
(C) Income Derived from All Sources Within the Philippines by a

Non-resident Alien Individual Not Engaged in Trade or Business Within the
Philippines. — The following forms of income derived from all sources within
the Philippines shall be subject to a final withholding tax in the hands of a
non-resident alien individual not engaged in trade or business within the Philippines
based on the following amounts and at the rates prescribed therefor:
(1) On the gross amount of income derived from all sources within the
Philippines by a non-resident alien individual who is not engaged
in trade or business in the Philippines as interest, cash and/or
property dividends, rents, salaries, wages, premiums, annuities,
compensation, remuneration, emoluments, or other fixed or
determinable annual or periodic or casual gains, profits and income
and capital gains — Twenty five percent (25%). Cdpr
Sec. 6(E) of the Code (i.e. the authority of the Commissioner to
prescribe the real property values), whichever is higher — Six
percent (6%).

under Section 24(A) of the Code for the normal rate of income tax
for individual citizens or residents or under Section 24(D)(1) of the
Code for the final tax on the presumed capital gains from sale of
property at six percent (6%) at the option of the taxpayer-seller.
(D) Income Payment to a Domestic Corporation. — The following

items of income shall be subject to a final withholding tax in the hands of a domestic
corporation, based on the gross amount thereof and at the rate of tax prescribed
therefor:
(1) Interest from any currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust fund and
similar arrangements derived from sources within the Philippines
— Twenty Percent (20%).
(2) Royalties derived from sources within the Philippines — Twenty

percent (20%).
(3) Interest income derived from a depository bank under the

Expanded Foreign Currency Deposit System — Fifteen percent
(15%).
(4) Income derived by a depository bank under the Expanded Foreign

Currency Deposit System from foreign transactions with local
commercial banks including branches of foreign banks that may be
authorized by the Bangko Sentral ng Pilipinas (BSP) to transact
business with Foreign Currency Deposit System Units and other
depository banks under the expanded foreign currency deposit
system including interest income from foreign currency loans
granted by such depository bank under the said expanded foreign
currency deposit system to residents — Ten percent (10%).
exchange or other disposition of land and building located in the
Philippines classified as capital assets, based on the gross selling
price or fair market value as determined in accordance with Sec.
6(E) of the Code, whichever is higher — Six percent (6%).


(E) Income Payment to a Resident Foreign Corporation. — The

following forms of income shall be subject to a final withholding tax in the hands of a
foreign corporation, based on the gross amount thereof and at the rate of tax
prescribed therefor:
(1) Offshore Banking Units — On income derived by offshore

banking units authorized by the Bangko Sentral ng Pilipinas (BSP)
from foreign currency transactions with local commercial banks
and branches of foreign banks that may be authorized by the BSP
to transact business with offshore banking units and other OBUs
including interest income derived from foreign currency loans
granted to resident — Ten percent (10%).
(2) Tax on Branch Profit Remittances — On any profit remitted

by the Philippine branch of a foreign corporation to its head office
abroad based on the total profits applied or earmarked for
remittance without any deduction for the tax component thereof
except those registered with the Philippine Economic Zones
Authority (PEZA) and other companies within the special
economic zones such as Subic Bay Metropolitan Authority
(SBMA) and Clark Development Authority (CDA) — Fifteen
percent (15%).
Interests, dividends, rents, royalties (including

remunerations for technical services), salaries, wages, premiums,
annuities, emoluments or other fixed or determinable annual
periodic or casual gains, profits, income and capital gains received
by a foreign corporation during each taxable year from all sources
within the Philippines shall not be considered as branch profits
unless the same are effectively connected with the conduct of its
trade or business in the Philippines.
(3) Interest on any currency bank deposit and yield or any other
monetary benefit from deposit substitutes and from trust funds and
similar arrangements and royalties derived from sources within the
Philippines — Twenty percent (20%).
(4) Interest income derived from a Depository Bank under the

Expanded Foreign Currency Deposit system — Seven and one-half
percent (7.5%).
(5) Income derived by a depository bank under the expanded foreign

currency deposit system from foreign currency transactions with
local commercial banks including branches of foreign banks that
may be authorized by the Bangko Sentral ng Pilipinas to transact
business with foreign currency deposit system units and other
depository banks under the expanded foreign currency deposit
system including interest income from foreign currency loans
granted by such depository banks under the said expanded foreign
currency deposit system to resident — Ten percent (10%).

(F) Income Derived From all Sources Within the Philippines by Non-Resident
Foreign Corporation. — The following shall be subject to final withholding tax
based on the gross amount of income and at the rate of tax prescribed therefor:
(1) In general — On gross income derived from all sources within the
Philippines such as interests, dividends, rents, royalties, salaries,
premiums (except reinsurance premiums), annuities, emoluments,
or other fixed or determinable annual, periodic or casual gains,
profits and income and capital gains (except capital gains realized
from sale, exchange, disposition of shares of stock in any domestic
corporation which is subject to capital gains tax under Sec.
28(B)(5)(c) — at the following rates:
34% - beginning January 1, 1998

33% - beginning January 1, 1999 and
32% - beginning January 1, 2000 and thereafter
(2) Gross income from all sources within the Philippines derived by
non-resident cinematographic film owners, lessors or distributors
— Twenty five percent (25%).
(3) On the gross rentals, lease and charter fees, derived by

non-resident owner or lessor of vessels from leases or charters to
Filipino citizens or corporations as approved by the Maritime
Industry Authority — Four and one-half percent (4.5%).
(4) On the gross rentals, charter and other fees derived by non-resident
lessor of aircraft, machineries and other equipment — Seven and a
half percent (7.5%).
(5) Interest on foreign loans contracted on or after August 1, 1986 —

Twenty percent (20%).
(6) Dividends received from a domestic corporation — Fifteen percent

(15%) of the cash and/or property dividends received from a
domestic corporation subject to the condition that the country in
which the nonresident foreign corporation is domiciled (a) shall
allow a credit against the tax due from the said nonresident foreign
corporation which are equivalent to taxes deemed to have been
paid in the Philippines equal to twenty percent (20%) for 1997,
nineteen percent (19%) for 1998, eighteen percent (18%) for 1999
and seventeen percent (17%) thereafter, which represents the
difference between the regular income tax of thirty-five percent
(35%) in 1997, thirty four percent (34%) in 1998, thirty three
percent (33%) in 1999, and thirty two percent (32%) thereafter on
corporations and the fifteen percent (15%) tax on dividends as
herein provided; or, (b) does not impose any income tax on
dividends received from a domestic corporation.
(G) Fringe Benefits Granted to the Employee (Except Rank and File
Employee). — On the grossed-up monetary value of fringe benefits granted or
furnished by the employer to his employees (except rank and file as defined in the
Code).
Employee is a citizen/resident - Thirty-five percent

alien/non-resident alien engaged in (35%)
trade or business within the Philippines
Employee is a non-resident alien not - Twenty-five percent
engaged in trade or business within the (25%)
Philippines
The grossed-up value of the fringe benefit shall be determined by dividing

the actual monetary value of the fringe benefit by the difference between one
hundred percent (100%) and the applicable rate of income tax. The actual
monetary value of the fringe benefit shall be divided by sixty-five percent (65%)
to get the grossed-up value subject to 35% fringe benefit tax (FBT); while the
divisor shall be seventy-five percent (75%) to get the grossed-up value subject to
25% FBT.
Fringe benefits however, which are required by the nature of or necessary to

the trade, business or profession of the employer, or where such fringe benefit is for
the convenience and advantage of the employer shall not be subject to the fringe
benefit tax. prcd
The term fringe benefit means any good, service or other benefit furnished or
granted in cash or in kind by an employer to an individual employee (except rank and
file employees) such as but not limited to, the following:
(1) Housing;
(2) Expense account;
(3) Vehicle of any kind;
(4) Household personnel, such as maid, driver and others;
(5) Interest on loan at less than market rate to the extent of the
difference between the market rate and actual rate granted;
(6) Membership fees, dues and other expenses borne by the employer
for the employee in social and athletic clubs or other similar
organizations;
(7) Expenses for foreign travel;
(8) Holiday and vacation expenses;
(9) Educational assistance to the employee or his dependents; and
(10) Life or health insurance and other non-life insurance premiums or

similar amounts in excess of what the law allows.
(H) Informer's Reward to Persons Instrumental in the Discovery of

Violations of the National Internal Revenue Code and the Discovery and Seizure of
Smuggled Goods. — The following rewards shall be subject to a final
withholding tax at the rate of ten percent (10%):
(1) Those given to persons, except an internal revenue official or

employee, or other public official or employee or his relative
within the sixth degree of consanguinity, who voluntarily gives
definite and sworn information not yet in the possession of the
BIR, leading to the discovery of frauds upon the Internal Revenue
Laws or violations of any of the provisions thereof, thereby
resulting in the recovery of revenues, surcharges and fees and/or
the conviction of the guilty party and/or imposition of any fine or
penalty.
(2) Those given to an informer where the offender has offered to

compromise the violation of law committed by him and his offer
has been accepted by the Commissioner and collected from the
offender.
The amount of reward shall be equivalent to ten percent

(10%) of the revenues, surcharges or fees recovered and/or fine or
penalty imposed and collected or one million pesos
(P1,000,000.00) per case whichever is lower.
The reward shall be paid under the rules and regulations

issued by the Secretary of Finance, upon the recommendation of
the Commissioner. However, such person shall not be entitled to a
reward, should no revenue, surcharges or fees be actually
recovered or collected nor shall apply to a case already pending or
previously investigated or examined by the Commissioner or any
of his deputies or agents or examiners, or the Secretary of Finance
or any of his deputies or agents.
(3) Those given to persons instrumental in the discovery and seizure of

such smuggled goods.
The amount of reward shall be equivalent to ten percent of

the market value of the smuggled and confiscated goods or one
million pesos (P1,000,000.00) per case whichever is lower. prLL
SECTION 2.57.2. Income Payments Subject to Creditable Withholding Tax

and Rates Prescribed Thereon. — Except as herein otherwise provided, there
shall be withheld a creditable income tax at the rates herein specified for each class of
payee from the following items of income payments to persons residing in the
Philippines:
(A) Professional fees, talent fees, etc., for services rendered — On the
gross professional, promotional and talent fees or any other form of remuneration for
the services rendered by the following:
Individual payee:
If gross income for the current year did not exceed P3M - Five percent (5%)
If gross income is more than P3M - Ten percent (10%)
Non-individual payee:
If gross income for the current year did not exceed P720,000 - Ten percent (10%)
If gross income exceeds P720,000 - Fifteen percent (15%)
(1) Those individually engaged in the practice of professions or

callings; lawyers; certified public accountants; doctors of
medicine; architects; civil, electrical, chemical, mechanical,
structural, industrial, mining, sanitary, metallurgical and geodetic
engineers; marine surveyors; doctors of veterinary science;
dentists; professional appraisers; connoisseurs of tobacco;
actuaries; interior decorators, designers, real estate service
practitioners (RESPs), (i.e., real estate consultants, real estate
appraisers and real estate brokers) requiring government licensure
examination given by the Real Estate Service pursuant to Republic
Act No. 9646 and all other professions requiring government
licensure examination regulated by the Professional Regulations
Commission, Supreme Court, etc.
For professional fees paid to medical practitioners (includes

doctors of medicine, doctors of veterinary science and dentists)
by hospitals and clinics or paid directly by health maintenance
organizations (HMOs) and/or similar establishments:
(a) It shall be the duty and responsibility of the hospitals,

clinics, HMOs and similar establishments to withhold and
remit taxes due on the professional fees of their respective
accredited medical practitioners, paid by patients who were
admitted and confined to such hospitals and clinics.
Hospitals, clinics, HMOs and similar establishments must
ensure that correct taxes due on the professional fees of
their medical practitioners have been withheld and timely
remitted to the Bureau of Internal Revenue (BIR). For this
purpose, hospitals and clinics shall not allow their medical
practitioners to receive payment of professional fees
directly from patients who were admitted and confined to
such hospital or clinic and, instead, must include the
professional fees in the total medical bill of the patient
which shall be payable directly to the hospital or clinic.
(b) Exception — The withholding tax herein prescribed shall

not apply whenever there is proof that no professional fee
has in fact been charged by the medical practitioner and
paid by his patient. Provided, however, that this fact is
shown in a sworn declaration jointly executed by the
medical practitioner, and the patient or his duly authorized
representative, in case the patient is a minor or otherwise
incapacitated. This sworn declaration, to be executed in the
form presented in Annex "A" of these Regulations, shall
form part of the records of the hospital or clinic and shall
constitute as part of its records and shall be made readily
available to any duly authorized Revenue Officer for tax
audit purpose. Provided, further, that the said administrator
of the hospital or clinic shall inform the Revenue District
Office having jurisdiction over such hospital or clinic about
any medical practitioner who fails or refuses to execute the
sworn statement herein prescribed, within ten (10) days
from the occurrence of such event.
(c) Hospitals and clinics shall submit the names and addresses
of medical practitioners in the following classifications,
every 15th day after the end of each calendar quarter, to the
Collection Division of the Revenue Region for non-large
taxpayers and at the Large Taxpayers Document Processing
and Quality Assurance Division (LTDP&QAD) in the
National Office or Large Taxpayers District Office (LTDO)
in the Region for large taxpayers, where such hospital or
clinic is registered, using the prescribed format.
(i) Medical practitioners whose professional fee was paid

by patients directly to the hospital or clinic.
(ii) Medical practitioners who did not charge any

professional fee from their patients.
(d) For this purpose, the term 'medical practitioners' shall

likewise include medical technologists, allied health
workers (e.g., occupational therapists, physical therapists,
speech therapists, nurses, etc.) and other medical
practitioners who are not under an employer-employee
relationship with the hospital, clinic or HMO and other
similar establishments.
(e) Hospitals and clinics shall be responsible for the accurate

computation of taxes to be withheld on professional fees
paid by patients thru the hospitals and clinics, in the same
way that HMOs shall be responsible for the computation of
taxes to be withheld from the professional fees paid by them
to the medical practitioners, and timely remittance of the
10% or 15% expanded withholding tax, whichever is
applicable.
The list of all income recipients-payees in this

Subsection shall be included in the Alphalist of Payees
Subject to Expanded Withholding Tax attached to BIR
Form No. 1604-E (Annual Information Return of Creditable
Income Taxes Withheld (Expanded)/Income Payments
Exempt from Withholding Tax).
Likewise, the hospitals, clinics or HMOs shall issue a

Certificate of Creditable Tax Withheld at Source (BIR Form
No. 2307) to medical practitioners who are subjected to
withholding, every 20th day following the close of the
taxable quarter or upon request of the payee.
All hospitals and clinics shall submit to the BIR

(Collection Division of the Regional Office having
jurisdiction over the place where the income earner is
registered/Large Taxpayers Collection Division for large
taxpayers in Metro Manila/LTDO for large taxpayers
outside Metro Manila), in three (3) copies [two (2) copies
for the BIR and one (1) copy for the taxpayer], a sworn
statement executed by the president/managing partner of the
corporation/company as to the complete and updated list of
medical practitioners accredited with them.
(2) Professional entertainers, such as, but not limited to, actors and
actresses, singers, lyricists, composers and emcees;
(3) Professional athletes, including basketball players, pelotaris and

jockeys;
(4) All directors and producers involved in movies, stage, radio,

television and musical productions;
(5) Insurance agents and insurance adjusters;
(6) Management and technical consultants;
(7) Bookkeeping agents and agencies;

(8) Other recipients of talent fees;
(9) Fees of directors who are not employees of the company paying
such fees, whose duties are confined to attendance at and
participation in the meetings of the board of directors.
(10) Income Payments to certain brokers and agents *(1) — on

gross commissions of customs, insurance, stock, immigration and
commercial brokers, fees of agents of professional entertainers and
real estate service practitioners (RESPs), (i.e., real estate
consultants, real estate appraisers and real estate brokers) who
failed or did not take up the licensure examination given by and
not registered with the Real Estate Service under the Professional
Regulations Commission;
(11) Commissions of independent and/or exclusive sales

representatives, and marketing agents of companies * (2)— on
gross commissions, rebates, discounts and other similar
considerations paid/granted to independent and/or exclusive sales
representatives and marketing agents and sub-agents of companies,
including multi-level marketing companies, on their sale of goods
and services by way of direct selling or similar arrangements
where there is no transfer of title over the goods from the seller to
the agent/sales representative;
"Multi-level marketing," for purposes of these regulations, is a

system of direct selling in which consumer products are sold by
individuals where consumer products and services are supplied by
an established multi-level marketing company who encourages the
distributor to build and manage his own sales force by recruiting,
motivating, and training others to sell the product or service. A
percentage on the sales of the distributor's sales force would be his
compensation in addition to his personal sales;
"Multi-level marketing companies," for purposes of these

regulations, means any entity that is engaged in the sale of its
products or services through individual that directly sell such
products or services to the consumers.
The amounts subject to withholding tax under this subsection (A) shall include
not only fees, but also per diem fees, allowances and other form of income payments
not subject to withholding tax on compensation.
In the case of professional entertainers, professional athletes, directors

involved in movies, stage, radio, television and musical productions and other
recipients of talent fees, the amounts subject to withholding tax shall also include
amounts paid to them in consideration for the use of their names or pictures in print,
broadcast, or other media or for public appearances, for purposes of advertisements or
sales promotion.
If the recipient of the aforementioned income, however, is an employee of

the lone income payor, such fees or payments shall be considered supplemental
compensation subject to the withholding tax on compensation under Section 2.78
of these Regulations.
Individual payees whose gross receipts/sales in a taxable year shall not

exceed P3M, are required to submit a sworn declaration of his/her gross
receipts/sales (Annex "B-1"), together with a copy of Certificate of Registration
(COR), to all the income payor/withholding agents not later than January 15 of
each year or at least prior to the initial payment of the professional
fees/commissions/talent fees, etc. in order for them to be subject to five percent
(5%). The ten percent (10%) withholding tax rate shall be applied in the
following cases: (1) the payee failed to provide the income payor/withholding
agent of such declaration; or (2) the income payment exceeds P3M, despite
receiving the sworn declaration from the income payee. In the case of individual
payees with only one payor, the sworn declaration to be accomplished shall be
Annex "B-2" and submitted, together with a copy of their COR, to the said lone
income payor.
In the case of non-individual payees, if the company or corporation's gross

income is estimated not to exceed P720,000 during the taxable year, the
authorized officer is required to provide all its income payors/withholding agents
with a notarized sworn statement to that effect (Annex "B-3"), together with a
copy of the COR, not later than January 15 of each year or prior to the initial
income payment so that the income payor/withholding agent shall only withhold
ten percent (10%). The fifteen percent (15%) withholding tax rate shall be
applied in the following cases: (1) the payee failed to provide the income
payor/withholding agent of such declaration; or (2) the income payment exceeds
P720,000, despite receiving the sworn declaration from the income payee. The
sworn declaration shall be executed by the president/managing partner of the
corporation/company/general professional partnerships.
Moreover, income payors/withholding agents shall subsequently execute a
sworn declaration (Annex "C") stating the number of payees who have
submitted the income payees' sworn declarations (Annexes "B-1", "B-2" and
"B-3") with the accompanying copies of their COR. Such declaration of the
income payors/withholding agents shall be submitted, together with the list of
payees, to the concerned BIR office where registered on or before January 31 of
each year or fifteen (15) days following the month when a new income recipient
has submitted the payee's sworn declaration.
(B) Rentals
(1) Real properties. — On gross rental for the continued use or

possession of real property used in business which the payor or
obligor has not taken or is not taking title, or in which he has no
equity — Five percent (5%);
(2) Personal properties. — On gross rental or lease in excess of Ten

Thousand Pesos (P10,000.00) annually for the continued use or
possession of personal property used in business which the payor
or obligor has not taken or is not taking title, or in which he has no
equity, except those under financial lease arrangements with
leasing and finance companies authorized to operate under
Republic Act No. 8556 (Financing Company Act of 1998). — Five
percent (5%)
However, the Ten Thousand Pesos (P10,000.00) threshold shall

not apply when the accumulated gross rental or lease paid by the
lessee to the same lessor exceeds or is reasonably expected to
exceed P10,000 within the year. In which case, the lessee shall
withhold the five percent (5%) withholding tax on the entire
amount.
(3) Poles, satellites and transmission facilities. — On gross rentals or

lease for the use of poles, satellites and/or transponder and
transmission facilities which include but not limited to the
following: switchboards, land lines/aerial cables, underground
cables and submarine cables — Five percent (5%);
(4) Billboards. — On gross rentals or lease of spaces used in posting

advertisements in the form of billboards and/or structures similar
thereto, posted in public places such as, but not limited to,
buildings, vehicles, amusement places, malls, street posts, etc. —
Five percent (5%)
(5) Cinematographic film rentals and other payments *(3) — On

gross payments to resident individuals and corporate
cinematographic film owners, lessors or distributors — Five
percent (5%).
(C) Income payments to certain contractors — On gross payments to

the following contractors, whether individual or corporate — Two percent (2%).
(1) General engineering contractors — Those whose principal

contracting business in connection with fixed works requiring
specialized engineering knowledge and skill including the
following divisions or subjects:
(a) Reclamation works;
(b) Railroads;
(c) Highways, streets and roads;
(d) Tunnels;
(e) Airports and airways;
(f) Waste reduction plants;
(g) Bridges, overpasses, underpasses and other similar works;
(h) Pipelines and other systems for the transmission of

petroleum and other liquid or gaseous substances;
(i) Land leveling;
(j) Excavating;
(k) Trenching;
(l) Paving; and
(m) Surfacing work.
(2) General Building contractors — Those whose principal

contracting business is in connection with any structure built, for
the support, shelter and enclosure of persons, animals, chattels, or
movable property of any kind, requiring in its construction the use
of more than two unrelated building trades or crafts, or to do or
superintend the whole or any part thereto. Such structure includes
sewers and sewerage disposal plants and systems, parks,
playgrounds, and other recreational works, refineries, chemical
plants and similar industrial plants requiring specialized
engineering knowledge and skills, powerhouse, power plants and
other utility plants and installation, mines and metallurgical plants,
cement and concrete works in connection with the
above-mentioned fixed works.
(3) Specialty Contractors — Those whose operations pertain to the

performance of construction work requiring special skill and
whose principal contracting business involves the use of
specialized building trades or crafts. cdasia
(4) Other contractors —
(a) Filling, demolition and salvage work contractors and

operators of mine drilling apparatus;
(b) Operators of dockyards;
(c) Persons engaged in the installation of water system, and gas

or electric light, heat or power;
(d) Operators of stevedoring, warehousing or forwarding

establishments;
(e) Transportation contractors which include common carriers

for the carriage of goods and merchandise of whatever kind
by land, air or water, where the gross payments by the payor
to the same payee amounts to at least two thousand pesos
(P2,000) per month, regardless of the number of shipments
during the month;
(f) Printers, bookbinders, lithographers and publishers except

those principally engaged in the publication or printing of
any newspaper, magazine, review or bulletin which appears
at regular intervals, with fixed prices for subscription and
sale;
(g) Messengerial, janitorial, private detective and/or security

agencies, credit and/or collection agencies and other
business agencies;
(h) Advertising agencies, exclusive of gross payments to

media;
(i) Independent producers of television, radio and stage

performances or shows;
(j) Independent producers of "jingles";
(k) Labor recruiting agencies and/or "labor-only"

contractors. For this purpose, any person who
undertakes to supply workers to an employer shall be
deemed to be engaged in "labor-only" contracting
where such person does not have substantial capital or
investment in the form of tools, equipment, machineries,
work premises and other materials and the workers
recruited and placed by such person are performing
activities which are directly related to the principal
business or operations of the employer which the
workers are habitually employed;
(l) Persons engaged in the installation of elevators, central air

conditioning units, computer machines and other equipment
and machineries and the maintenance services thereon;
(m) Persons engaged in the sale of computer services, computer

programmers, software/program developer/designer,
internet service providers, web page designing,
computer data processing, conversion or base services
and other computer related activities;
(n) Persons engaged in landscaping services;
(o) Persons engaged in the collection and disposal of garbage;
(p) TV and radio station operators on sale of TV and radio

airtime; and
(q) TV and radio blocktimers on sale of TV and radio
commercial spots.
(D) Income distribution to the beneficiaries. *(4) — On income distributed to

the beneficiaries of estates and trusts as determined under Sec. 60 of the Code,
except such income subject to final withholding tax and tax exempt income —
Fifteen percent (15%);
(E) Income payments to partners of general professional partnerships.

— Income payments made periodically or at the end of the taxable year by a general
professional partnership to the partners, such as drawings, advances, sharings,
allowances, stipends, etc. — Fifteen percent (15%), if the gross income for the current
year exceeds P720,000; and Ten percent (10%), if otherwise.
(F) Gross selling price or total amount of consideration or its equivalent paid
to the seller/owner for the sale, exchange or transfer of real property classified as
ordinary asset. — A creditable withholding tax based on the gross selling
price/total amount of consideration or the fair market value determined in accordance
with Section 6(E) of the Code, whichever is higher, paid to the seller/owner for the
sale, transfer or exchange of real property, other than capital asset, shall be imposed
upon the withholding agent,/buyer, in accordance with the following schedule:
A. Where the seller/transferor is exempt from the creditable withholding tax in
accordance with Sec. 2.57.5 of these regulations — Exempt
B. Upon the following values of real property, where the seller/transferor is

habitually engaged in the real estate business:
With a selling price of five hundred thousand pesos (P500,000.00) or less

— 1.5%
With a selling price of more than five hundred thousand pesos
(P500,000.00) but not more than two million pesos (P2,000,000.00) —
3.0%
With a selling price of more than two million pesos (P2,000,000.00) —
5.0%
C. Where the seller/transferor is not habitually engaged in the real estate

business — 6.0%
Registration with the HLURB or HUDCC shall be sufficient for a
seller/transferor to be considered as habitually engaged in the real estate business. If
the seller/transferor is not registered with HLURB or HUDCC, he/it may prove that
he/it is engaged in the real estate business by offering other satisfactory evidence (for
example, he/it consummated during the preceding year at least six taxable real estate
transactions, regardless of amount). Notwithstanding the foregoing, for purposes of
these Regulations, banks shall not be considered as habitually engaged in the real
estate business.
Gross selling price shall mean the consideration stated in the sales document or
the fair market value determined in accordance with Section 6 (E) of the Code,
whichever is higher. In an exchange, the fair market value of the property received in
exchange shall be considered as the consideration.
If the buyer is an individual not engaged in trade or business, the following

rules shall apply:
(i) If the sale is a sale of property on the installment plan (i.e.,

payments in the year of sale do not exceed twenty five percent
(25%) of the selling price), no withholding is required to be made
on the periodic installment payments. In such a case, the applicable
rate of tax based on the gross selling price or fair market value of
the property at the time of the execution of the contract to sell,
whichever is higher, shall be withheld on the last installment or
installments immediately prior to such last installment, if the last
installment is not sufficient to cover the tax due, to be paid to the
seller until the tax is fully paid.
(ii) If, on the other hand, the sale is on a "cash basis" or is a

"deferred-payment sale not on the installment plan" (that is,
payments in the year of sale exceed 25% of the selling price), the
buyer shall withhold the tax based on the gross selling price or fair
market value of the property, whichever is higher, on the first
installment.
However, if the buyer is engaged in trade or business,

whether a corporation or otherwise, these rules shall apply:
(i) If the sale is a sale of property on the installment plan [i.e.,

payments in the year of sale do not exceed twenty five percent
(25%) of the selling price], the tax shall be deducted and withheld
by the buyer from every installment which tax shall be based on
the ratio of actual collection of the consideration against the agreed
consideration appearing in the Contract to Sell applied to the gross
selling price or fair market value of the property at the time of the
execution of the Contract to Sell, whichever is higher.
The term 'consideration' refers to the selling price exclusive

of interest. Interest earned as an incident of installment payment, if
any, shall be subject to the ordinary income tax rate.
(ii) If, on the other hand, the sale is on a "cash basis" or is a

"deferred-payment sale not on the installment plan" (that is,
payments in the year of sale exceed 25% of the selling price), the
buyer shall withhold the tax based on the gross selling price or fair
market value of the property, whichever is higher, on the first
installment.
In any case, no Certificate Authorizing Registration (CAR)/Tax Clearance

Certificate (TCL), shall be issued to the buyer unless the withholding tax due on the
sale, transfer, or exchange of real property has been fully paid.
For sale of property on installment basis or deferred payment basis where the
Contract to Sell is always executed before the execution of the Deed of Sale, the said
Contract to Sell must be attached to the Deed of Absolute Sale executed upon
completion of the payments and the duly notarized original duplicate copy of both
documents must be presented to the RDO having jurisdiction of the place where the
property is located for validation of the correctness of issuance of CAR/TCL.
It is to be noted, however, that in case of sale of real property paid under

installment payment or deferred payment basis, the payment of the documentary
stamp tax (DST) shall accrue upon the execution of the Deed of Absolute Sale but the
basis for the imposition thereof shall be the gross selling price or fair market value of
the property, whichever is higher, at the time of the execution of the Contract to Sell.
If upon completion of the payment of the purchase price of real property

classified as ordinary asset, but before the execution of the Deed of Sale, the buyer
decides to assign his right over the property to another person for a consideration, the
assignment shall be considered a separate sale of real property and, therefore, subject
to the creditable/expanded withholding tax (EWT) or final withholding of capital
gains tax, as the case may be, which shall be withheld by the assignee of such
property based on the consideration per Deed of Assignment or the fair market value
of such property at the time of assignment, whichever is higher, and to the DST
imposed under Sec. 196 of the same Code using the same basis.
It is to be clarified, however, that sale of interest in real property (real property

purchased on installment covered by Contract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realized gain thereon which is measured by the difference
between the agreed consideration and the amount actually paid by the said original
buyer.
(G) Additional income payments to government personnel from importers,

shipping and airline companies, or their agents. — On gross additional
payments by importers, shipping and airline companies, or their agents to government
personnel for overtime services as authorized by law — Fifteen percent (15%);
For this purpose, the importers, shipping and airline companies or their agents,
shall be the withholding agents of the Government;
(H) Certain income payments made by credit card companies — On

one-half (1/2) of the gross amounts paid by any credit card company in the
Philippines to any business entity, whether natural or juridical person, representing
the sales of goods/services made by the aforesaid business entity to cardholders —
One percent (1%)
(I) Income payment made by top withholding agents, either private

corporations or individuals, to their local/resident supplier of goods and
local/resident supplier of services other than those covered by other rates of
withholding tax. — Income payments made by any of the top withholding
agents, including non-resident aliens engaged in trade or business in the
Philippines shall be subjected to the following withholding tax rates:
Supplier of goods — One percent (1%)
Supplier of services — Two percent (2%)
Top withholding agents shall refer to those taxpayers whose gross

sales/receipts or gross purchases or claimed deductible itemized expenses, as the
case may be, amounted to TWELVE MILLION PESOS (P12,000,000.00) during
the preceding taxable year.
The top withholding agents by concerned LTS/RRs/RDOs shall be published

in a newspaper of general circulation. It may also be posted in the BIR website. These
shall serve as the "notice" to the top withholding agents. The obligation to withhold
under this sub-section shall commence on the first (1st) day of the month following
the month of publication. Taxpayers who are classified as top withholding agents
prior to the effectivity of these Regulations shall remain as such until failure to
satisfy the aforesaid criteria and duly published as delisted from the existing list
of top withholding agents. The initial and succeeding publications shall include the
additional top withholding agents and those that are delisted.
The term "goods" pertains to tangible personal property. It does not include
intangible personal property, as well as agricultural products which are defined
under item (N) of this Section.
The term "local resident suppliers of goods/suppliers of services" pertains to a

supplier from whom any of the top withholding agents, regularly makes its purchases
of goods/services. As a general rule, this term does not include a casual purchase of
goods/services, that is, purchase made from a non-regular supplier and oftentimes
involving a single purchase. However, a single purchase which involves Ten thousand
pesos (P10,000.00) or more shall be subject to withholding tax under this subsection.
The term "regular suppliers," for purposes of these regulations, refers to suppliers
who are engaged in business or exercise of profession/calling with whom the
taxpayer-buyer has transacted at least six (6) transactions, regardless of the amount
per transaction, either in the previous year or current year.
(J) Income payments made by a government office, national or local,

including barangays, or their attached agencies or bodies, and government-owned
or controlled corporations to its local/resident supplier of goods/services, other than
those covered by other rates of withholding tax. — Income payments, except
any casual or single purchase of P10,000.00 and below, which are made by a
government office, national or local, including barangays, or their attached agencies
or bodies, and government-owned or controlled corporations, on their purchases of
goods and purchases of services from local/resident suppliers.
Supplier of goods — One percent (1%)
Supplier of services — Two percent (2%)
A government-owned or controlled corporation shall withhold the tax in its

capacity as a government-owned or controlled corporation rather than as a corporation
stated in Subsection (I) hereof.
(K) Tolling fees paid to refineries. — On the gross processing/tolling fees

paid to refineries for the conversion of molasses to its by-products and raw sugar to
refined sugar — Five percent (5%)
(L) Payments made by pre-need companies to funeral parlors. — On

gross payments made by pre-need companies to funeral parlors for funeral services
rendered. — One percent (1%)
(M) Payments made to embalmers. — On gross payments made to

embalmers for embalming services rendered to funeral companies. — One percent
(1%)
For purposes of these regulations, all income payments paid to sub-agents or

their equivalent, whether paid directly or indirectly by the agent or the owner of the
goods, shall be subject to withholding tax in the same manner as that of the agent.
(N) Income payments made to suppliers of agricultural products. —

Income payments made to agricultural suppliers such as those, but not limited to,
payments made by hotels, restaurants, resorts, caterers, food processors, canneries,
supermarkets, livestock, poultry, fish and marine product dealers, hardwares,
factories, furniture shops and all other establishments, in excess of the cumulative
amount of Three Hundred Thousand Pesos (P300,000.00) within the same taxable
year. — One percent (1%)
The term "agricultural suppliers" refers to suppliers/sellers of agricultural,

forest and marine food and non-food products, livestock and poultry of a kind
generally used as, or yielding or producing foods for human consumption, and
breeding stock and genetic materials therefor. "Livestock" shall include cow, bull and
calf, pig, sheep, goat and other animals similar thereto. "Poultry" shall include fowl,
duck, goose, turkey and other animals similar thereto. "Marine products" shall include
fish and crustacean, such as but not limited to, eel, trout, lobster, shrimp, prawn,
oyster, mussel and clam, shell and other aquatic products.
Meat, fruit, fish, vegetable and other agricultural and marine food products,
even if they have undergone the simple processes of preparation or preservation for
the market, such as freezing, drying, salting, smoking or stripping, including those
using advanced technological means of packaging, such as shrink wrapping in
plastics, vacuum packing, tetra-pak and other similar packaging method, shall still be
covered by this subsection.
An agricultural food product shall include, but shall not be limited to the
following: corn, coconut, copra, palay, cassava, coffee, etc. Polished and/or husked
rice, corn grits, locally produced raw cane sugar and ordinary salt shall be
considered as agricultural food products.
(O) Income payments on purchases of minerals, mineral products and quarry

resources as defined and discussed in Section 151 of the Tax Code. — Income
payments on purchases of minerals, mineral products and quarry resources, such as
but not limited to silver, gold, marble, granite, gravel, sand, boulders and other
materials/products — Five percent (5%). However, BSP is required to withhold one
percent (1%) of gross payments made, and remit the same to the Government.
(P) MERALCO Payments on the following:
(1) MERALCO Refund arising from Supreme Court Case G.R. No.
141314 of April 9, 2003 to customers under Phase IV as approved
by Energy Regulatory Board (ERC) — On gross amount of
refund given by MERALCO to customers — Fifteen percent
(15%)
(2) Interest income on the refund of meter deposits determined,

computed and paid in accordance with the "Rules to Govern
Refund of Meter Deposits to Residential and Non-Residential
Customers", as approved by the ERC under Resolution No. 8,
Series of 2008, dated June 04, 2008 implementing Article 8 of the
Magna Carta for Residential Electricity Customers and ERC
Resolution No. 2005-10 RM (Otherwise known as DSOAR) dated
January 18, 2006, exempting all electricity consumers from the
payment of meter deposit.
On gross amount of interest paid directly to the customers or applied against

the customer's billing:
(i) Residential and General Service customers whose monthly

electricity exceeds 200 kwh as classified by MERALCO — Ten
percent (10%);
(ii) Non-Residential Customers — Fifteen percent (15%);
(Q) Interest income on the refund paid through direct payment or

application against customer's billings by other electric Distribution Utilities (DUs) in
accordance with the rules embodied in ERC Resolution No. 8, Series of 2008, dated
June 04, 2008, governing the refund of meter deposits which was approved and
adopted by ERC in compliance with the mandate of Article 8 of the Magna Carta for
Residential Electricity Customers and Article 3.4.2 of DSOAR, exempting all
electricity consumers, whether residential or non-residential, from the payment of
meter deposit.
On gross amount of interest paid directly to the customers or applied against

the customer's billings:
(i) Residential and General Service customers whose monthly

electricity consumption exceeds 200 kwh as classified by the
concerned DU — Ten percent (10%)
(ii) Non-Residential Customers — Fifteen percent (15%).
(R) Income payments made by political parties and candidates of local

and national elections on all their purchase of goods and services related to
campaign expenditures, and income payments made by individuals or juridical
persons for their purchases of goods and services intended to be given as campaign
contributions to political parties and candidates — Five percent (5%).
(S) Interest income derived from any other debt instruments not within
the coverage of 'deposit substitutes' and Revenue Regulations No. 14-2012, unless
otherwise provided by law or regulations — Fifteen percent (15%).
(T) Income payments to Real Estate Investment Trust (REIT). —

Income payments made to corporate taxpayers duly registered with LTS-Regular LT
Audit Division as REIT for purposes of availing the incentive provisions of Republic
Act No. 9856, otherwise known as "The Real Estate Investment Trust Act of 2009",
as implemented by RR No. 13-2011. — One percent (1%);
(U) Income payments on sugar. — On gross payments on purchases of

sugar. — One percent (1%).
1. Proprietors or operators of sugar mills/refineries on their mill share, and

buyers of Quedans or Molasses Storage Certificates from the sugar planters on locally
produced raw cane sugar, raw sugar and molasses shall withhold the creditable
income tax and remit the same to the BIR based on the following, subject, however,
to adjustment, when deemed necessary by the Commissioner, depending on the
prevailing market price of raw cane sugar, raw sugar and molasses:
1.1 For locally produced raw cane sugar and raw sugar — the
composite price, in metric tons, governing the specified crop year
of raw cane sugar and raw sugar as reflected in one of the reports
(Annex "A") under the weekly Final Sugar Production Bulletin
duly issued by the Sugar Regulatory Administration (SRA) on the
date of sale, or actual selling price, whichever is higher.
It shall be ensured that a copy of the weekly Final Sugar

Production Bulletin be officially transmitted by the SRA to the
Commissioner of Internal Revenue within twenty four (24) hours
from the date of issuance thereof.
1.2 For Molasses — base price of FOUR THOUSAND PESOS

(P4,000.00) per metric ton or actual selling price, whichever is
higher.
2. Buyers of refined sugar, whether locally produced or imported, shall

withhold the creditable income tax based on the actual selling price thereof.
For purposes of this subsection, the following terms shall have the following
meaning:
(i) Buyers of Quedan or Molasses Storage Certificates — refer to

traders or industry users duly accredited by the SRA who bid
and/or purchase the Quedans or Molasses Storage Certificates
from the sugar planters.
(ii) Mill Share — refers to payment to sugar mill/refinery by the sugar

planter for the milling of sugarcane. As such, it is equivalent to a
sale of locally produced raw sugar.
(iii) Molasses Storage Certificate — refers to the warehouse receipt

issued by a sugar mill/refinery to the owner, as stated therein,
attesting to the fact that the volume of molasses is stored at the
mill's facilities, with the commitment that it will be delivered to the
holder of said document upon demand.
(iv) Sugar Mill/Refinery — refers to a domestic company engaged in

the business of milling sugarcane into raw sugar, or in the refining
of raw sugar.
(v) Sugar Planter — refers to the original owner of sugarcane brought

to the mill for milling purposes.
(vi) Sugar Regulatory Administration (SRA) — refers to an agency of
the Philippine government under the Department of Agriculture,
responsible for promoting the growth and development of the
sugar industry, through greater participation of the private sector,
and for improving the working conditions of the laborers, created
by Executive Order No. 18, Series of 1986.
(vii) Quedan — refers to a warehouse receipt issued by a sugar

mill/refinery to the owner as stated therein, attesting to the fact that
the volume and class of sugar is kept at the said sugar
mill/refinery, and with the commitment that it will be delivered to
the holder of said document by the sugar mill's/refinery's
warehouseman upon demand. Quedan is issued in the name of the
proprietor or operator of the sugar mill/refinery, for its mill share,
and to the sugar planter, as owner of the sugarcane, as certified by
SRA representative at the sugar mill/refinery.
(viii) Trader — refers to a domestic company or person given the

authority and license by the SRA to engage in the business of
trading sugar, molasses, or muscovado, as the case may be.
(ix) Sugar — refers to raw cane sugar, raw sugar and refined sugar.
The Regional Director/Revenue District Officer, which has jurisdiction over

the physical location of the sugar mills/refineries, shall issue the Authority to Release
Locally Produced Raw Sugar/Raw Cane Sugar/Molasses (Annexes "A" or "B", or "C"
as applicable) or Authority to Release Locally Refined Sugar (Annexes "D" or "E" as
applicable) to the proprietors or operators, for purposes of allowing the
transfer/withdrawal of their mill share, or to the buyers of Quedans or Molasses
Storage Certificates on the locally produced sugar; Provided, however, That, copies of
proofs of payment of the creditable withholding tax due thereon (i.e., duly validated
Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) [BIR
Form No. 1601-E] and Bank Payment/Deposit Slip/Revenue Official Receipt [BIR
Form No. 2524]) shall have been submitted and attached to the written request for
said authorization.
Provided, finally, That, notwithstanding the presentation of proof of exemption

from the payment of income tax (e.g., BIR ruling, special law, etc.), the concerned
proprietor, or operator of the sugar mill/refinery, or any buyer of Quedan or Molasses
Storage Certificate is still required to withhold and remit the creditable withholding
tax.
For purposes of these regulations, all income payments paid to sub-agents or
their equivalent, whether paid directly or indirectly by the agent or the owner of the
goods, shall be subject to withholding tax in the same manner as that of the agent.
Any income subject to income tax may be subject to withholding tax;

however, income exempt from income tax is consequently exempt from
withholding tax. Further, income not subject to withholding tax does not
necessarily mean that it is not subject to income tax.
SECTION 2.57.3. Persons Required to Deduct and Withhold. — The

following persons are hereby constituted as withholding agents for purposes of the
creditable tax required to be withheld on income payments enumerated in Section
2.57.2:
(A) In general, any juridical person, whether or not engaged in trade or

business;
(B) An individual, with respect to payments made in connection with

his trade or business;
However, insofar as taxable sales, exchanges or transfers of

real property are concerned, the buyers, whether or not engaged in
trade or business, are constituted as withholding agents. In
any case, no Certificate Authorizing Registration (CAR)/Tax
Clearance Certificate (TCL) shall be issued to the buyer unless the
withholding tax due on the sale, transfer or exchange of real
property has been duly paid.
Since the tax herein involved and being withheld is income

tax, the burden of the tax is really upon the seller although the
mode of payment of the tax is through withholding by the buyer.
As such, the tax withheld is considered a part of the consideration
agreed between the seller and buyer resulting, therefore, to a net
take to the seller of only the difference between the agreed
consideration/selling price and the tax withheld.
(C) All government offices including government-owned or controlled

corporations, as well as provincial, city and municipal
governments and barangays.
(D) All individuals, juridical persons and political parties, with respect
to their income payments made as campaign expenditures and/or
purchase of goods and services intended as campaign
contributions.
Agents, employees or any person purchasing goods or services/paying for and

in behalf of the aforesaid withholding agents shall likewise withhold in their behalf,
provided that the official receipts of payment/sales invoice shall be issued in the name
of the person whom the former represents and the corresponding certificate of taxes
withheld (BIR Form No. 2307) shall immediately be issued upon withholding of the
tax.
All income payments which are required to be subjected to withholding tax

shall be subject to the corresponding withholding tax rate to be withheld by the person
having control over the payment and who, at the same time, claims the expenses, [e.g.
payments to utility companies which are required to be subjected to withholding tax
shall likewise be subjected to withholding tax even if the meter or billing statement
(e.g. electric or water meter or the telephone bill) is not in the name of the payor, as
long as valid proof that payment of a particular expense is being shouldered by the
aforementioned payor (i. e. contract between the registered user of the meter and the
payor); payments made by persons who are sharing portion of the bill which is in the
name of another person as long as he is a duly constituted withholding agent and shall
only withhold on the portion of the expense being shouldered by him].
Income payments made thru brokers or agents or other person authorized to

collect/receive payments for and on behalf of the payee, whether for consideration or
otherwise, shall likewise be subject to the corresponding withholding tax rates to be
withheld by the payor/person having control over the payment with the corresponding
issuance of certificate of taxes withheld in the name of the payee whom the agent
represents.
The obligation to withhold is imposed upon the buyer-payor of income

although the burden of tax is really upon the seller-income earner/payee; hence,
unjustifiable refusal of the latter to be subjected to withholding shall be a ground for
the mandatory audit of all internal revenue tax liabilities, as well as the imposition
of penalties pursuant to Section 275 of the Tax Code, as amended, upon verified
complaint of the buyer-payor.
Provided, however, that an individual seller-income earner/payee, may

not be subjected to withholding under Section 2.57.2 hereof if the source of
income comes from a lone income payor and the total income payment is less
than P250,000 in a taxable year. In this case, the concerned individual shall
execute an Income Payee's Sworn Declaration of gross receipts/sales (Annex
"B-2") that shall be submitted to the lone payor. The payee's sworn declaration
shall be submitted to the lone income payor of income before the initial payment
of income or before January 15 of each year, whichever is applicable. The
income payor/withholding agent shall in turn execute its own Income
Payor/Withholding Agent's Sworn Declaration (Annex "C") stating the number
of payees who shall not be subjected to withholding taxes and have duly
submitted their income payees' sworn declarations and copies of COR. Together
with the income payor/withholding agent's sworn declaration is the list of payees,
who shall not be subjected to withholding tax, which shall be submitted by the
income payor/withholding agent to the concerned BIR office on or before the last
day of January of each year or on the fifteenth (15th) day of the following month
when a new income recipient submitted the payee's sworn declaration to the lone
income payor/withholding agent.
The income payor/withholding agent's sworn declaration (Annex "C")

shall be filed in two (2) copies with the concerned LTS/RR/RDO office where the
income payor/withholding agent is registered and shall be distributed as follows:
(1) Original copy for the BIR; and
(2) Duplicate copy for lone payor/withholding agent.
The duly received income payor/withholding agent's sworn declaration

including the required list shall serve as proof that the income payments made
are not subject to withholding tax.
In the event that the individual payee's cumulative gross receipts in a year
exceed P250,000, the income payor/withholding agent shall withhold the
prescribed withholding tax based on the amount in excess of P250,000, despite
the prior submission of the individual income payee's sworn declaration. On the
other hand, if the individual income payee failed to submit an income payee's
sworn declaration to the lone income payor/withholding agent, the income
payment shall be subject to the applicable withholding tax even though in a
taxable year the income payment is P250,000 and below.
For individual payees, the income payor/withholding agent shall withhold

the prescribed withholding tax rate. In case there are two rates prescribed, the
higher rate shall apply if:
(1) the payee failed to provide the income payor/withholding agent

of the required declaration; or (2) the income payment exceeds
P3M, despite receiving the sworn declaration from the income
payee.
For non-individual payees, the income payor/withholding agent shall

withhold the prescribed withholding tax rate. In case there are two rates
prescribed, the higher rate shall apply if: (1) the payee failed to provide the
income payor/withholding agent of the required declaration; or (2) the income
payment exceeds P720,000, despite receiving the sworn declaration from the
income payee.
Illustration 1: Ms. Tina supplies special cupcakes on a regular basis

to RPSV Supermarket, a top withholding agent pursuant to Section
2.57.2 (I) of these regulations. Prior to 2018, her annual sales to
RPSV Supermarket never exceeded P250,000. She only bakes
cupcakes upon order. RPSV Supermarket is her lone payor of
income; thus, she executed the sworn declaration of gross receipts
stating that her gross expected receipts shall not exceed P250,000 for
the year from RPSV Supermarket. However, in the latter part of
2018, RPSV Supermarket noted that its purchase of cupcakes shall
exceed P250,000. As expected, in 2018 the total purchase of cupcakes
by RPSV Supermarket from Ms. Tina amounted to P300,000.
Computation:
In this case, RPSV Supermarket shall withhold the amount of P500,

computed as follows:
Gross Receipts P300,000.00

Less: Amount not subject to withholding tax 250,000.00
–––––––––––
Income subject to withholding tax P50,000.00
Multiply by: EWT rate 1%
–––––––––––
Amount of withholding tax P500.00
==========
* RPSV Supermarket is included as "Top Withholding
Agent," thus, the rate of income tax withholding is 1% for
the payments made to Ms. Tina, the supplier of goods.
Illustration 2: Mr. Marvin was hired as a courier by G.O.D.
Collection Services, Inc., under a Contract for Service for one (1)
year, with payment on the basis of the number of letters/notices
delivered. In the past years, Mr. Marvin's gross receipts from the
said company never exceeded P250,000. In 2018, his gross receipts
amounted to P230,000.
Computation:
In this case, G.O.D. Collection Services, Inc. shall withhold the

amount of P4,600, computed as follows:
Gross Receipts P230,000.00

Less: Amount not subject to withholding tax 0.00
–––––––––––
Income subject to withholding tax P230,000.00
Multiply by: EWT rate 2%
–––––––––––
Amount of withholding tax P4,600.00
==========
* The withholding tax rate applicable in this case is 2%, since
Mr. Marvin is a supplier of services considered as service
contractor.
* However, no withholding shall be made if Mr. Marvin
executed a payee's sworn declaration in accordance with the
format (Annex "B-2") provided under these regulations, and
the same has been received by G.O.D. Collection Services,
Inc. (lone payor/withholding agent) and processed in
accordance with prescribed policy."
SECTION 2.57.4. Time of Withholding. — The obligation of the payor

to deduct and withhold the tax under Section 2.57 of these Regulations arises at the
time an income payment is paid or payable, or the income payment is accrued or
recorded as an expense or asset, whichever is applicable, in the payor's books,
whichever comes first. The term "payable" refers to the date the obligation becomes
due, demandable or legally enforceable.
Provided, however, that where income is not yet paid or payable but the
same has been recorded as an expense or asset, whichever is applicable, in the
payor's books, the obligation to withhold shall arise in the last month of the
return period in which the same is claimed as an expense or amortized for tax
purposes.
Example — X Corporation, a domestic corporation which reports income

and expenses on a calendar year basis, issues 2-year bonds with face value of
P100,000,000 at a discount amounting to P6,000,000 on January 1, 2002 to
twenty five (25) investors. It records in its books the amortized portion of the
discount as expense in the amount of P250,000/month (P6,000,000 divided by 24
months).
Since the discount is not yet paid or payable but the aliquot portion of
which has already been recorded as expense for tax purposes, the withholding of
the 20% final tax shall be done on the last month of the quarter when the same
has been claimed as an expense in the quarterly income tax returns/final
adjustments returns filed by X Corporation.
Thus, in the above illustration, the amortized discount to be recorded by X

Corporation for the months of January, February and March 2002 amounting to
P750,000 shall be subject to 20% final tax of P150,000 come March 2002, which
tax shall be remitted within 10 days after the quarter ending March 2002 (that
is, on or before April 10, 2002). The said withholding tax shall be reported in its
Monthly Remittance Return of Final Income Taxes Withheld required to be filed
in April 2002. On the other hand, for the calendar quarter ending December
2002, the withholding of the final tax for the amortized discount pertaining to the
months of October, November and December shall be done in December 2002
and the remittance thereof shall be on or before January 15, 2003. The said
withholding tax shall be reported in its Monthly Remittance Return of Final
Income Taxes Withheld required to be filed in January 2003.
SECTION 2.57.5. Exemption from Withholding. — The withholding of

creditable withholding tax prescribed in these Regulations shall not apply to income
payments made to the following:
(A) National government agencies and its instrumentalities including

provincial, city, municipal governments and barangays except
government-owned and controlled corporations.
(B) Persons enjoying exemption from payment of income taxes
pursuant to the provisions of any law, general or special, such as
but not limited to the following:
(1) Sales of real property by a corporation which is registered

with and certified by the Housing and Land Use Regulatory
Board (HLURB) or the Housing and Urban Development
Coordinating Council (HUDCC) as engaged in socialized
housing project where the selling price of the house and lot
or only the lot does not exceed the socialized housing
price applicable to the area as prescribed and certified
by the said board/council, as provided under Republic
Act No. 7279 and its implementing regulations;
(2) Corporations duly registered with the Board of Investments,

Philippine Export Processing Zones and Subic Bay
Metropolitan Authority enjoying exemption from
income tax pursuant to E.O. 226, as amended, R.A.
7916, the Omnibus Investment Code of 1987
and R.A. 7227, as amended, respectively;
(3) Corporations which are exempt from the income tax under
Sec. 30 of the Tax Code, as amended, and
government-owned or controlled corporations exempt
from income tax under Section 27(A)(C) of the same
Code, to wit: the Government Service Insurance System
(GSIS), the Social Security System (SSS), the Philippine
Health Insurance Corporation (PHIC), and the Local
Water Districts (LWD); However, the income payments
arising from any activity which is conducted for profit or
income derived from real or personal property shall be
subject to withholding tax as prescribed in these
regulations;
(4) General professional partnerships;
(5) Joint ventures or consortium formed for the purpose of

undertaking construction projects or engaging in petroleum,
coal, geothermal and other energy operations pursuant to an
operating or consortium agreement under a service contract
with the government. Provided, however, joint ventures
or consortium formed for the purpose of undertaking
construction projects shall comply with the following
conditions to be considered as joint venture not taxable
as a corporation:
a) Should involve joining or pooling of resources by

licensed local contracts; that is, licensed as
general contractor by the Philippine Contractors
Accreditation Board (PCAB) of the Department
of Trade and Industry (DTI);
b) These local contractors are engaged in

construction business; and
c) The Joint Venture itself must likewise be duly

licensed as such by the PCAB of the DTI.
Joint ventures involving foreign contractors may also be

treated as a non-taxable corporation only if the member
foreign contractor is covered by a special license as
contractor by the PCAB of the DTI; and the
construction project is certified by the appropriate
Tendering Agency (government office) that the project
is a foreign financed/internationally-funded project and
that international bidding is allowed under the Bilateral
Agreement entered into by and between the Philippine
Government and the foreign/international financing
institution pursuant to the implementing rules and
regulations of Republic Act No. 4566 otherwise known
as Contractor's License Law.
(6) Individuals who earn P250,000.00 and below from a lone

income payor upon compliance with the following
requirements:
a. The individual has executed a payee's sworn

declaration of gross receipts in accordance with
the format per attached Annex "B-2";
b. The sworn declaration has been submitted to the

lone income payor/withholding agent on or before
January 15 of each year or before the initial
income payment, whichever is applicable.
Illustration 3: Mr. Wil, a messenger, was hired by Brgy. MRU Health

Center, under a Job Order arrangement. His monthly pay is fixed at
P15,000. He provided Brgy. MRU a notarized sworn declaration of
gross receipts. Brgy. MRU is the lone income payor of Mr. Wil which
was likewise indicated in the aforesaid sworn declaration.
Computation:
The income tax to be withheld shall be computed as follows:
Annual Income (P15,000 X 12) P180,000.00

Tax to be withheld P0.00
* Mr. Wil submitted to Brgy. MRU the notarized payee's

sworn declaration stating that his gross receipts shall not
exceed P250,000, and since the actual receipts for the year
did not exceed the said amount, the income payment was
not subjected to withholding. Brgy. MRU, a Local
Government Unit (LGU), may also withhold business tax
depending on the income tax regime selected by Mr. Wil
as indicated in his sworn declaration.
SECTION 2.58. Returns and Payment of Taxes Withheld at Source.

—
(A) Manner, Venue and Time of Filing of Withholding Tax Returns and
Payment of Taxes Withheld at Source — Taxpayers mandated to
electronically file and pay shall use the BIR's electronic system, while those not
mandated has the option to either use the said electronic system, or file with the
Authorized Agent Banks (AABs) under the jurisdiction of the Revenue District
Office where they are registered. Withholding agents located at municipalities
where there is no AAB, the returns shall be filed with the Revenue Collection
Officer assigned in the said municipality. The filing of the withholding tax
returns (BIR Form No. 1601EQ for creditable withholding tax and Form Nos.
1602 for final tax on interest on bank deposits, 1603 for final tax withheld on
fringe benefits, and 1601FQ for all other final withholding taxes) and payment of
the taxes withheld at source shall be made not later than the last day of the
month following the close of the quarter during which the withholding was
made.
For this purpose, the quarter shall follow the calendar quarter, e.g., for
taxes withheld during the quarter ending March 31, the same shall be remitted
by the withholding agent on or before April 30. The return filed shall be
accompanied by the Quarterly Alphabetical List of Payees (QAP), reflecting the
name of income payees, Taxpayer Identification Number (TIN), the amount of
income paid segregated per month with total for the quarter (all income
payments prescribed as subject to withholding tax under these regulations,
whether actually subjected to withholding tax or not subjected due to
exemption), and the total amount of taxes withheld, if any.
Considering that taxes withheld by the withholding agents are held in

trust for the government and its availability is an imperious necessity to ensure
sufficient cash inflow to the National Treasury, withholding agents shall file BIR
Monthly Remittance Form (BIR Form No. 0619E and/or 0619F) every tenth
(10th) day of the following month when the withholding is made, regardless of
the amount withheld. For withholding agents using EFPS facility, the due date is
on the fifteenth (15th) day of the following month. Withholding agents with zero
remittance are still required to use and file the same form.
In the case of sale of shares of stocks not traded thru a local stock
exchange and sale of real property considered as capital asset, the filing and
payment of the tax due thereon shall be made within thirty (30) days after the
sale or disposition using BIR Form Nos. 1707 and 1706, respectively. For sale of
real property considered as ordinary asset, the remittance of tax withheld shall
be made on or before the tenth (10th) day following the month of transaction
using BIR Form No. 1606.
(B) Withholding tax statement for taxes withheld — Every payor

required to deduct and withhold taxes under this subsection shall furnish each payee,
a withholding tax statement, in triplicate, within twenty (20) days from the close
of the quarter. The prescribed form (BIR Form No. 2307 for creditable
withholding tax and BIR Form 2306 for final withholding tax) shall be used,
showing the monthly income payments made, the quarterly total, and the
amount of taxes withheld. Provided, however, that upon request of the payee, the
payor must furnish such statement, simultaneously with the income payment.
(C) Annual information return and annual alphabetical list of payees for
income tax withheld at source. — The withholding agent is required to file
with the concerned office of the LTS/RR/RDO where the withholding agent is
registered, the following:
1. Annual Information Return of Creditable Taxes Withheld

(Expanded)/Income Payments Exempt from Withholding Tax
(BIR Form No. 1604E) including the corresponding Annual
Alphabetical List of Payees — on or before March 1 of the
following year in which payments were made; and
2. Annual Information Return on Final Income Taxes Withheld

(BIR Form 1604F) including the corresponding Annual
Alphabetical List of Payees — On or before January 31 of the
following year in which payments were made.
SECTION 2.58.1. Income of Recipient. — Income upon which any creditable

tax is required to be withheld at source shall be included in the return of its recipient.
The excess of the withheld tax over the tax due on his return shall be refunded to him
subject to the authority of the Commissioner to refund taxes under Sec. 204 of
the NIRC. If the income tax collected at source is less than the tax due on his return,
the difference shall be paid in accordance with the provisions of Sec. 56 of the
Code.
The taxes withheld by the withholding agents shall be maintained in separate

accounts and should not be commingled with any other funds of the withholding
agent. They shall be considered as a trust fund held for government until they are
remitted.
SECTION 2.58.2. Registration with the Register of Deeds. — Deeds of

conveyances of land or land and building/improvement thereon arising from sales,
barters, or exchanges subject to the creditable expanded withholding tax shall not be
recorded by the Register of Deeds unless the Commissioner or his duly authorized
representative has certified that such transfers and conveyances have been reported
and the expanded withholding tax, inclusive of the documentary stamp tax, due
thereon have been fully paid, pursuant to the provisions of Sections 57 and 196
of the Code, respectively.
The Register of Deeds shall annotate on the Original Certificate of Title,

Transfer Certificate of Title or Condominium Certificate of Title of the said
property such information required under Section 58(E) of the Tax Code. In
case of any violation of the said requirement, he shall be liable to the penalties
provided under Section 269 of the said Tax Code.
SECTION 2.58.3. Claim for Tax Credit or Refund. —
(A) The amount of creditable tax withheld shall be allowed as a tax credit
against the income tax liability of the payee in the quarter of the taxable year in which
income was earned or received.
(B) Claims for tax credit or refund of any creditable income tax which was
deducted and withheld on income payments shall be given due course only when it is
shown that the income payment has been declared as part of the gross income and the
fact of withholding is established by a copy of the withholding tax statement duly
issued by the payor to the payee showing the amount paid and the amount of tax
withheld therefrom.
Proof of remittance is the responsibility of the withholding agent.
(C) Excess Credits — An individual or corporate taxpayer's excess expanded

withholding tax credits for the taxable quarter/year shall automatically be allowed 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, provided he
submits with his income tax return, a copy of the first page of his income tax return
for the previous taxable period showing the amount of his excess withholding tax
credits, and on which return he has not opted for a cash refund or tax credit
certificate. cdtai
(1) If in lieu of the automatic application of his excess credit, the taxpayer
wants a cash refund or a tax credit certificate for use in payment of his other national
internal revenue tax liabilities, he shall make a written request therefor, within two
years after the payment of the tax (Ref. Secs. 204(c) and 229 of the Code ),
provided however, that if the taxpayer has indicated in his income tax return his
option for either a cash refund or a tax credit certificate, such indication shall be
considered sufficient for the purpose. Upon filing of his request, the taxpayer's
income tax return showing the excess expanded withholding tax credits shall be
examined. The excess expanded withholding tax so determined, shall be
refunded/credited to the taxpayer.
(2) Sample computation of application of excess credits — ordinary
Taxable Period
1997 1998-QTR1 1998-QTR2 1998-QTR3
Tax Due 1,000 200 200 500
Less: Tax
Withheld (1,500) (500) (300) 0
Net Tax
Payable/
Creditable (500) (300) (100) 500
In the above illustration, there is an excess credit in 1997 that can be applied to
the subsequent quarter. And if the option to apply the excess credit is initiated in the
first quarter of 1998, the taxpayer cannot avail of a refund/tax credit certificate of the
excess credit of P500 in 1997.
SECTION 2.58.4. Verification of Returns and Statement. — Any return,

statement or other documents required to be filed under these Regulations shall
contain a written declaration that it is made under penalties of perjury and such
declaration shall be under oath.
It shall be the duty of tax officials to accept the income tax return or other
documents submitted under oath.
SECTION 2.58.5. Requirement for Deductibility. — Any income

payment which is otherwise deductible under the Code shall be allowed as a
deduction from the payor's gross income only if it is shown that the income tax
required to be withheld has been paid to the Bureau in accordance with Secs. 57 and
58 of the Code.
A deduction will also be allowed in the following cases where no withholding

of tax was made: LexLib
(A) The payee reported the income and pays the tax due thereon and
the withholding agent pays the tax including the interest incident to
the failure to withhold the tax, and surcharges, if applicable, at the
time of the audit investigation or reinvestigation/reconsideration.
(B) The recipient/payee failed to report the income on the due date
thereof, but the withholding agent/taxpayer pays the tax, including
the interest incident to the failure to withhold the tax, and
surcharges, if applicable, at the time of the audit/investigation or
reinvestigation/reconsideration.
(C) The withholding agent erroneously underwithheld the tax but pays
the difference between the correct amount and the amount of tax
withheld, including the interest, incident to such error, and
surcharges, if applicable, at the time of the audit/investigation or
reinvestigation/reconsideration.
Items of deduction representing return of capital such as those pertaining

to purchases of raw materials forming part of finished product or purchases of
goods for resale, shall be allowed as deductions upon the withholding agent's
payment of the basic withholding tax and penalties incident to non-withholding
or underwithholding.
SECTION 2.58.6. Tax Paid by Recipient of Income. — 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. Such liability stays even if the employee
subsequently pays the tax. The payment of the tax by the employee does not relieve
the employer from the liability for penalties and/or additions to the tax for failure to
deduct and withhold within the time prescribed by law or regulations. The employer
will not be relieved of his liability for payment of the tax required to be withheld
unless he can show that the tax has been paid by the employee. The amount of any tax
withheld/collected by the employer is a special fund in trust for the government of the
Philippines.
SECTION 2.78. Withholding Tax on Compensation. — The withholding of

tax on compensation income is a method of collecting the income tax at source upon
receipt of the income. It applies to all employed individuals whether citizens or aliens,
deriving income from compensation for services rendered in the Philippines. The
employer is constituted as the withholding agent.
SECTION 2.78.1. Withholding of Income Tax on Compensation Income. —
(A) Compensation Income Defined. — In general, the term

"compensation" means all remuneration for services performed by an employee for
his employer under an employer-employee relationship, unless specifically excluded
by the Code.
The name by which the remuneration for services is designated is immaterial.

Thus, salaries, wages, emoluments and honoraria, allowances, commissions (e.g.,
transportation, representation, entertainment and the like); fees including director's
fees, if the director is, at the same time, an employee of the employer/corporation;
taxable bonuses and fringe benefits except those which are subject to the fringe
benefits tax under Sec. 33 of the Code; taxable pensions and retirement pay; and
other income of a similar nature constitute compensation income.
The basis upon which the remuneration is paid is immaterial in determining

whether the remuneration constitutes compensation. Thus, it may be paid on the basis
of piece-work, or a percentage of profits; and may be paid hourly, daily, weekly,
monthly or annually. cdrep
Remuneration for services constitutes compensation even if the relationship of

employer and employee does not exist any longer at the time when payment is made
between the person in whose employ the services had been performed and the
individual who performed them.
(1) Compensation paid in kind. — Compensation may be paid in money or in

some medium other than money, as for example, stocks, bonds or other forms of
property. If services are paid for in a medium other than money, the fair market value
of the thing taken in payment is the amount to be included as compensation subject to
withholding. If the services are rendered at a stipulated price, in the absence of
evidence to the contrary, such price will be presumed to be the fair market value of
the remuneration received. If a corporation transfers to its employees its own stock as
remuneration for services rendered by the employee, the amount of such remuneration
is the fair market value of the stock at the time the services were rendered.
Where compensation is paid in property other than money, the employer shall
make necessary arrangements to ensure that the amount of the tax required to be
withheld is available for payment to the Commissioner.
(2) Living quarters or meals. — If a person receives a salary as remuneration

for services rendered, and in addition thereto, living quarters or meals are provided,
the value to such person of the quarters and meals so furnished shall be added to the
remuneration paid for the purpose of determining the amount of compensation subject
to withholding. However, if living quarters or meals are furnished to an employee for
the convenience of the employer, the value thereof need not be included as part of
compensation income.
(3) Facilities and privileges of relatively small value. — Ordinarily,

facilities, and privileges (such as entertainment, medical services, or so-called
"courtesy" discounts on purchases), otherwise known as "de minimis benefits,"
furnished or offered by an employer to his employees, are not considered as
compensation subject to income tax and consequently to withholding tax, if such
facilities or privileges are of relatively small value and are offered or furnished by the
employer merely as means of promoting the health, goodwill, contentment, or
efficiency of his employees.
The following shall be considered as "de minimis" benefits not subject to

income tax as well as withholding tax on compensation income of both managerial
and rank and file employees:
(a) Monetized unused vacation leave credits of private employees not

exceeding ten (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 P1,500 per employee per semester or P250 per month;
(d) Rice subsidy of P2,000 or one (1) sack of 50 kg. rice per month
amounting to not more than P2,000;
(e) Uniform and Clothing allowance not exceeding P6,000 per 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
P10,000.00 per annum;
(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 a 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;
(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 twenty-five percent (25%) of the basic minimum
wage on a per region basis;
(k) Benefits received by an employee by virtue of a collective
bargaining agreement (CBA) and productivity incentive
schemes provided that the total annual monetary value
received from both CBA and productivity incentive schemes
combined do not exceed ten thousand pesos (Php10,000.00) per
employee per taxable year;
All other benefits given by employers which are not included in the above
enumeration shall not be considered as "de minimis" benefits, and hence, shall be
subject to income tax as well as withholding tax on compensation income.
Any amount given by the employer as benefits to its employees, whether

classified as "de minimis" benefits or fringe benefits, shall constitute as deductible
expense upon such employer.
Where compensation is paid in property other than money, the employer shall
make necessary arrangements to ensure that the amount of the tax required to be
withheld is available for payment to the Bureau of Internal Revenue.
(4) Tips and gratuities. — Tips or gratuities paid directly to an employee by a

customer of the employer which are not accounted for by the employee to the
employer are considered as taxable income but not subject to withholding.
(5) Pensions, retirement and separation pay. — Pensions, retirement

and separation pay constitute compensation subject to withholding, except those
provided under Subsection B of this section.
(6) Fixed or variable transportation, representation and other allowances —
(a) IN GENERAL, fixed or variable transportation, representation and

other allowances which are received by a public officer or
employee of a private entity, in addition to the regular
compensation fixed for his position or office, is compensation
subject to withholding. Provided, however, that
Representation and Transportation Allowance (RATA) granted to
public officers and employees under the General Appropriations
Act and the Personnel Economic Relief Allowance (PERA) which
essentially constitute reimbursement for expenses incurred in the
performance of government personnel's official duties shall not be
subject to income tax and consequently to withholding tax.
Provided further, that pursuant to E.O. 219 which took effect
on January 1, 2000, Additional Compensation Allowance (ACA)
given to government personnel shall not be subject to withholding
tax pending its formal integration into the basic pay. Consequently,
and effective for the taxable year 2000, ACA shall be classified as
part of the "other benefits" under Section 32(B)(7)(e) of the Code
which are excluded from gross compensation income provided the
total amount of such benefits does not exceed P30,000.00.
(b) Any amount paid specifically, either as advances or

reimbursements for travelling, representation and other bonafide
ordinary and necessary expenses incurred or reasonably expected
to be incurred by the employee in the performance of his duties are
not compensation subject to withholding, if the following
conditions are satisfied:
(i) It is for ordinary and necessary travelling and representation

or entertainment expenses paid or incurred by the employee
in the pursuit of the trade, business or profession; and
(ii) The employee is required to account/liquidate for the

expenses in accordance with the specific requirements of
substantiation for each category of expenses pursuant to
Sec. 34 of the Code. The excess of advances made
over actual expenses shall constitute taxable income if such
amount is not returned to the employer. Reasonable
amounts of reimbursements/advances for travelling and
entertainment expenses which are pre-computed on a daily
basis and are paid to an employee while he is on an
assignment or duty need not be subject to the requirements
of substantiation and to withholding.
(7) Vacation and sick leave allowances. — Amounts of "vacation allowances

or sick leave credits" which are paid to an employee constitute compensation. Thus,
the salary of an employee on vacation or on sick leave, which is paid notwithstanding
his absence from work constitutes compensation. However, the monetized value of
unutilized vacation leave credits of ten (10) days or less which are paid to private
employees during the year and the monetized value of leave credits paid to
government officials and employees shall not be subject to income tax and
consequently to withholding tax.
(8) Deductions made by employer from compensation of employee. — Any

amount which is required by law to be deducted by the employer from the
compensation of an employee including the withheld tax is considered as part of the
employee's compensation and is deemed to be paid to the employee as compensation
at the time the deduction is made.
(9) Remuneration for services as employee of a nonresident alien individual

or foreign entity. — The term "compensation" includes remuneration for services
performed by an employee of a nonresident alien individual, foreign partnership or
foreign corporation, whether or not such alien individual or foreign entity is engaged
in trade or business within the Philippines. Any person paying compensation on
behalf of a non-resident alien individual, foreign partnership, or foreign corporation
which is not engaged in trade or business within the Philippines is subject to all
provisions of law and regulations applicable to an employer.
(10) Compensation for services performed outside the Philippines. —

Remuneration for services performed outside the Philippines by a resident citizen for
a domestic or a resident foreign corporation or partnership, or for a non-resident
corporation or partnership, or for a non-resident individual not engaged in trade or
business in the Philippines shall be treated as compensation which is subject to tax.
A non-resident citizen as defined in these regulations is taxable only on income

derived from sources within the Philippines. In general, the situs of the income
whether within or without the Philippines, is determined by the place where the
service is rendered.
(B) Exemptions from withholding tax on compensation. — The

following income payments are exempted from the requirement of withholding tax on
compensation but may be subject to income tax depending on the nature/sources
of income earned by the individual recipient:
(1) Remunerations received as an incident of employment, as follows:
(a) Retirement benefits received under Republic Act under 7641

and those received by officials and employees of private firms,
whether individual or corporate, under a reasonable private benefit
plan maintained by the employer which meet the following
requirements:
(i) The plan must be reasonable;
(ii) The benefit plan must be approved by the Bureau;
(iii) The retiring official or employee 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; and
(iv) The retiring official or employee should not have previously

availed of the privilege under the retirement benefit plan of
the same or another employer.
(b) Any amount received by an official or employee or by his heirs

from the employer due to death, sickness or other physical
disability or for any cause beyond the control of the said official or
employee, such as retrenchment, redundancy, or cessation of
business. cdrep
The phrase "for any cause beyond the control of the said
official or employee" connotes involuntariness on the part of the
official or employee. The separation from the service of the official
or employee must not be asked for or initiated by him. The
separation was not of his own making. Whether or not the
separation is beyond the control of the official or employee, being
essentially a question of fact, shall be determined on the basis of
prevailing facts and circumstances. It shall be duly established by
the employer by competent evidence which should be attached to
the monthly return for the period in which the amount paid due to
the involuntary separation was made.
Amounts received by reason of involuntary separation remain

exempt from income tax even if the official or the employee, at the
time of separation, had rendered less than ten (10) years of service
and/or is below fifty (50) years of age.
Any payment made by an employer to an employee on

account of dismissal, constitutes compensation regardless of
whether the employer is legally bound by contract, statute, or
otherwise, to make such payment.
(c) Social security benefits, retirement gratuities, pensions and other

similar benefits received by residents or non-resident citizens of
the Philippines or aliens who come to reside permanently in the
Philippines from foreign government agencies and other
institutions private or public;
(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 1954 as amended; and
(f) Benefits received from the GSIS Act of 1937, as amended,

and the retirement gratuity received by government officials and
employees.
(2) Remuneration paid for agricultural labor —
(a) Remuneration for services which constitute agricultural labor and

paid entirely in products of the farm where the labor is performed
is not subject to withholding. In general, however, the term,
"agricultural labor" does not include services performed in
connection with forestry, lumbering or landscaping.
(b) Remuneration paid entirely in products of the farm where the labor
is performed by an employee of any person in connection with any
of the following activities is excepted as remuneration for
agricultural labor:
(i) The cultivation of soil;
(ii) The raising, shearing, feeding, caring for, training, or

management of livestock, bees, poultry, or wildlife; or
(iii) The raising or harvesting of any other agricultural or

horticultural commodity. The term "farm" as used in this
subsection includes, but is not limited to stock, dairy,
poultry, fruits and truck farms, plantations, ranches,
nurseries ranges, orchards, and such greenhouse and other
similar structures as are used primarily for the raising of
agricultural or horticultural commodities.
(c) The remuneration paid entirely in products of the farm where labor
is performed for the following services in the employ of the owner
or tenant or other operator of one or more farms is not considered
as remuneration for agricultural labor, provided the major part of
such services is performed on a farm:
(i) Services performed in connection with the operation,

management, conservation, improvement, or maintenance
of any such farms or its tools or equipments; or
(ii) Services performed in salvaging timber, or clearing land

brush and other debris left by a hurricane or typhoon.
The services described in (i) above may include for example,

services performed by carpenters, painters, mechanics, farm
supervisors, irrigation engineers, bookkeepers, and other skilled or
semi-skilled workers, which contribute in any way to the conduct
of the farm or farms, as such, operated by the person employing
them, as distinguished from any other enterprise in which such
person may be engaged. Since the services described in this
paragraph must be performed in the employ of the owner or tenant
or other operator of the farm, the exception does not extend to
remuneration paid for services performed by employees of a
commercial painting concern, for example, which contracts with a
farmer to renovate his farm properties. cdasia
(d) Remuneration paid entirely in products of the farm where labor is

performed by an employee in the employ of any person in
connection with any of the following operations is not considered
as remuneration for agricultural labor without regard to the place
where such services are performed:
(i) The making of copra, stripping of abaca, etc.;
(ii) The hatching of poultry;
(iii) The raising of fish;
(iv) The operation or maintenance of ditches, canals, reservoirs,

or waterways used exclusively for supplying or storing
water for farming purposes; and
(v) The production or harvesting of crude gum from a living

tree or the processing of such crude gum into gum spirits or
turpentine and gum resin, provided such processing is
carried on by the original producer of such crude gum.
(e) Remuneration paid entirely in products of the farm where labor is

performed by an employee in the employ of a farmer or a farmer's
cooperative, organization or group in the handling, planting,
drying, packing, packaging, processing, freezing, grading, storing
or delivering to storage or to market or to carrier for transportation
to market, of any agricultural or horticultural commodity,
produced by such farmer or farmer-members of such organization
or group, is excepted as remuneration for agricultural labor.
Services performed by employees of such farmer or farmer's
organization or group in handling, planting, drying, packaging,
processing, freezing, grading, storing, or delivering to storage or to
market or to carrier for transportation to market of commodities
produced by persons other than such farmer or members of such
farmer's organization or group are not performed "as an incident to
ordinary farming operation".
All payments made in cash or other forms other than products

of the farm where labor is performed, for services constituting
agricultural labor as explained above, are not within the exception.
(3) Remuneration for domestic services. — Remuneration paid for services of

a household nature performed by an employee in or about the private home of the
person by whom he is employed is not subject to withholding. However, the services
of household personnel furnished to an employee (except rank and file employees) by
an employer shall be subject to the fringe benefits tax pursuant to Sec. 33 of the
Code, as amended.
A private home is the fixed place of abode of an individual or family. If the

home is utilized primarily for the purpose of supplying board or lodging to the public
as a business enterprise, it ceases to be a private home and remuneration paid for
services performed therein is not exempted.
In general, services of a household nature in or about a private home include

services rendered by cooks, maids, butlers, valets, laundresses, gardeners, chauffeurs
of automobiles for family use.
The remuneration paid for the services above enumerated which are performed
in or about rooming or lodging houses, boarding houses, clubs, hotels, hospitals or
commercial offices or establishments is considered as compensation;
Remuneration paid for services performed as a private secretary, even if they
are performed in the employer's home is considered as compensation;
(4) Remuneration for casual labor not in the course of an employer's trade or
business. — The term "casual labor" includes labor which is occasional, incidental or
regular. The expression "not in the course of the employer's trade or business"
includes labor that does not promote or advance the trade or business of the employer.
Thus, any remuneration paid for labor which is occasional, incidental or

irregular, and does not promote or advance the employer's trade or business, is not
considered as compensation. cdasia
EXAMPLE: A's business is that of operating a sawmill. He employs B, a

carpenter, at an hourly wage to repair his home. B's work is irregular and he spends,
the greater part of two days in completing the work. Since B's labor is casual and is
not in the course of A's business, the remuneration paid for such services is exempted.
Any remuneration paid for casual labor, that is, labor which is occasional,
incidental or irregular, but which is rendered in the course of the employer's trade or
business, is considered as compensation.
EXAMPLE: E is engaged in the business of operating a department store. He

employs additional clerks for a short period. While the services of the clerks may be
casual, they are rendered in the course of the employer's trade or business and
therefore the remuneration paid for such services is considered as compensation.
Any remuneration paid for casual labor performed for a corporation is

considered as compensation;
(5) Compensation for services by a citizen or resident of the Philippines for a

foreign government or an international organization. — Remuneration paid for
services performed as an employee of a foreign government or an international
organization is exempted. The exemption includes not only remuneration paid for
services performed by ambassadors, ministers and other diplomatic officers and
employees but also remuneration paid for services performed as consular or other
officer or employee of a foreign government or as a non-diplomatic representative of
such government.
(6) Damages. — Actual, moral, exemplary and nominal damages received by

an employee or his heirs pursuant to a final judgment or compromise agreement
arising out of or related to an employer-employee relationship.
(7) Life Insurance. — The proceeds of life insurance policies paid to the heirs
or beneficiaries upon the death of the insured, whether in a single sum or otherwise,
provided however, that interest payments agreed under the policy for the amounts
which are held by the insured under such an agreement shall be included in the gross
income.
(8) Amount received by the insured as a return of premium. — The amount

received by the insured, as a return of premium or premiums paid by him under life
insurance, endowment, or annuity contracts either during the term or at the maturity
of the term mentioned in the contract or upon surrender of the contract.
(9) Compensation for injuries or sickness. — Amounts received through

Accident or Health Insurance or under Workmen's Compensation Acts, as
compensation for personal injuries or sickness, plus the amount of any damages
received whether by suit or agreement on account of such injuries or sickness.
(10) Income exempt under treaty. — Income of any kind to the extent required
by any treaty obligation binding upon the Government of the Philippines.
(11) Thirteenth (13th ) month pay and other benefits. —
(a) Thirteenth (13th) month pay equivalent to the mandatory one (1)
month basic salary of officials and employees of the government
(whether national or local), including government-owned or
controlled corporations, and/or private offices received after the
twelfth month pay; and
(b) Other benefits such as Christmas bonus, productivity incentives,

loyalty award, gift in cash or in kind, and other benefits of similar
nature actually received by officials and employees of both
government and private offices, including the Additional
Compensation Allowance (ACA) granted and paid to all officials
and employees of the National Government Agencies (NGAs)
including State Universities and Colleges (SUCs),
Government-Owned and/or Controlled Corporations (GOCCs),
Government Financial Institutions (GFIs) and Local Government
Units (LGUs).
The above stated exclusions (a) and (b) shall cover benefits paid or
accrued during the year, provided that the total amount shall not
exceed ninety thousand pesos (P90,000.00), which may be
increased through rules and regulations issued by the Secretary of
Finance, upon recommendation of the Commissioner, after
considering among others, the effect on the same of the inflation
rate at the end of the taxable year.
(12) GSIS, SSS, Medicare and other contributions. — GSIS, SSS, Medicare
and Pag-IBIG contributions, and union dues of individual employees.
(13) Compensation income of Minimum Wage Earners (MWEs) who

work in the private sector and being paid the Statutory Minimum Wage (SMW), as
fixed by Regional Tripartite Wage and Productivity Board (RTWPB)/National Wages
and Productivity Commission (NWPC), applicable to the place where he/she is
assigned, as well as the compensation of employees in the public sector who are
paid not more than the SMW applicable to non-agricultural sector, as fixed by
RTWPB/NWPC, applicable to the place where he/she is assigned.
'Statutory Minimum Wage' (SMW) shall refer to the rate fixed by the Regional
Tripartite Wage and Productivity Board (RTWPB), as defined by the Bureau of Labor
and Employment Statistics (BLES) of the Department of Labor and Employment
(DOLE). The RTWPB of each region shall determine the wage rates in the different
regions based on established criteria and shall be the basis of exemption from income
tax for this purpose.
The NWPC shall officially submit a Matrix of Wage Order by region, and any
changes thereto, within ten (10) days after its effectivity to the Assistant
Commissioner, Collection Service, for circularization in the BIR.
Aside from the SMW, the holiday pay, overtime pay, night shift differential
pay, and hazard pay, earned by the aforementioned MWE shall likewise be covered
by the above exemption. For purposes of these regulations, hazard pay shall mean the
amount paid by the employer to MWEs who were actually assigned to danger or
strife-torn areas, disease-infested places, or in distressed or isolated stations and
camps, which expose them to great danger of contagion or peril to life. Any hazard
pay paid to MWEs which does not satisfy the above criteria is deemed subject to
income tax and consequently, withholding tax on the said hazard pay.
In case of hazardous employment, the employer shall indicate in the

Alphabetical List of Employees, the MWEs who received the hazard pay, the
period of employment, the amount of hazard pay, and the justification for such
payment as certified by the concerned DOLE/allied agency, which certification is
part of the attachment in the filing of the Annual Information Return (BIR
Form 1604-C). In the case of employees under the public sector, the document to
be attached is the Department of Budget Management (DBM) Circular related
to such payment of hazard pay.
Additional compensation such as commissions, honoraria, fringe benefits,

benefits in excess of the allowable statutory amount of P90,000.00, taxable
allowances, and other taxable income given to an MWE by the same employer
other than those which are expressly exempt from income tax shall be subject to
withholding tax using the withholding tax table.
Likewise, MWEs receiving other income from other sources in addition to

compensation income, such as income from other concurrent employers, from
the conduct of trade, business, or practice of profession, except income subject to
final tax, are subject to income tax only to the extent of income other than SMW,
holiday pay, overtime pay, night shift differential pay, and hazard pay earned
during the taxable year.
Any income subject to income tax may be subject to withholding tax;

however, income exempt from income tax is consequently exempt from
withholding tax. Further, income not subject to withholding tax does not
necessarily mean that it is not subject to income tax.
Any reduction or diminution of wages for purposes of exemption from income

tax shall constitute misrepresentation and therefore, shall result to the automatic
disallowance of expense, i.e., compensation and benefits account, on the part of the
employer. The offenders may be criminally prosecuted under existing laws.
(14) Compensation during the year not exceeding Two hundred fifty
thousand pesos (P250,000).
Illustration 4: Ms. Alona is employed in CSO Corporation. She

received the SMW for 2018 in the total amount of P175,000, inclusive
of the 13th month pay. In the same year, she also received overtime
pay of P40,000 and night-shift differential of P25,000. She also
received commission income from the same employer of P20,000,
thus, total income received amounted to P260,000.
Computation:
The employer of Ms. Alona shall determine the nature of income

payments. The amount to be subjected to income tax withholding
shall be computed as follows:
Total Income received P260,000.00

Less: Income exempt from tax
Basic SMW P175,000.00
Overtime Pay 40,000.00
Night Shift Differential 25,000.00
–––––––––––
Total Exempt Income as MWE 240,000.00
–––––––––––
Taxable Income — Commission P20,000.00
–––––––––––
Tax Due
On not over P250,000.00 (P20,000.00 x 0%) P0.00
==========
* Taxpayer's income of SMW, overtime pay, and night shift differential

pay are expressly exempt from income tax under the law and
consequently from withholding tax.
* Commission income from the same employer is taxable, however, under
the graduated income tax rates since it is less than P250,000, there is no
tax due.
Illustration 5: Ms. Cyril is employed in MAFD Corporation and is

also a part-time real estate agent for a real estate broker. In addition
to the SMW of P180,000 she received from her employer, she likewise
received P75,000 as commissions from her real estate dealings for the
year 2018.
Computation:
The amount subject to income tax and withholding tax shall be

computed depending on the income tax regime selected by Ms. Cyril,
since she is qualified to avail of such option (income from
business/practice of profession did not exceed P3,000,000) and such
option was reflected in the payee's sworn declaration given by the
taxpayer to the payor/withholding tax agent-real estate broker, as
follows:
1. Under the graduated income tax (IT) regime:

Less: Income exempt from income tax — SMW 180,000.00
–––––––––––
–––––––––––
Tax Due
On not over P250,000.00 (P75,000.00 x 0%) P0.00
==========
2. Under the 8% IT regime:

Less: Income exempt from income tax — SMW 180,000.00
–––––––––––
–––––––––––
Tax Due
P75,000.00 x 8% P6,000.00
==========
* Taxpayer's income as MWE does not exceed P250,000; hence,

not subject to withholding tax.
* Since taxpayer is a mixed income earner and has received

income from other sources in addition to her compensation
income, the commission received during the taxable year is
subject to income tax and consequently, to withholding tax.
* If Ms. Cyril selected the graduated income tax regime, her

commission income is subject to income tax at 0% since it did
not exceed P250,000 and she is also subject to business tax.
However, if she selected the 8% income tax regime, she is
liable for income tax amounting to P6,000, but this is in lieu of
the graduated income tax and the percentage tax under Section
116 of the Tax Code, as amended.
SECTION 2.78.2. Payroll Period. — The term "payroll period" means

the period of services for which a payment of compensation is ordinarily made to an
employee by his employer. It is immaterial that the compensation is not always paid
at regular intervals.
EXAMPLE: If an employer ordinarily pays the weekly wages of his employees

at the end of the week, but if for some reason a particular employee receives payment
of his salaries for the past week in the middle of the current week and receives the
remainder at the end of the same week, the payroll period is still the calendar week; or
if, instead, the employee is sent on a three (3)-week trip by his employer and receives
at the end of the trip a single compensation payment for three (3)-week services, the
payroll period is still the calendar week, and the compensation payment shall be
treated as though it were three (3) separate weekly compensation payments. LLphil
For the purpose of determining the tax, an employee can have but one payroll
period with respect to the compensation paid by any one employer. Thus, if an
employee is paid a regular compensation for the weekly payroll and in addition
thereto is paid supplemental compensation (for example taxable bonuses) determined
with respect to a different period, the payroll period is the weekly payroll period.
SECTION 2.78.3. Employee. — The term "employee" is an individual

performing services under an employer-employee relationship. The term covers all
employees, including officers and employees, whether elected or appointed, of the
Government of the Philippines, or any political subdivision thereof or any agency or
instrumentality.
In general, the relationship of the employer and employee exists when the
person for whom services were performed has the right to control and direct the
individual who performs the services, not only as to the result to be accomplished by
the work but also as to the details and means by which the result is accomplished. An
employee is subject to the will and control of the employer not only as to what shall
be done, but how it shall be done. In this connection, it is not necessary that the
employer actually directs or controls the manner in which the services are performed.
It is sufficient that he has the right to do so.
The right to dismiss an employee is also an important factor indicating that the
person possessing that right is an employer. Other factors or characteristics of an
employer, which may not be necessarily present in every case, are furnishing the tools
and furnishing of a place to work, to the individual who performs the services. In
general, an individual is not considered an employee if he is subject to the control or
direction of another merely on to the result to be accomplished by the work, and not
on to the means and methods for accomplishing the result.
In general, individuals who follow an independent trade, business, or

profession, in which the offer their services to the public, are not employees.
The measurement, method or designation of compensation is also immaterial if

the relationship of employer and employee in fact exists.
No distinction is made between classes or grades of employees. Thus

superintendents, managers, and others belonging to similar levels are employees. An
officer of a corporation is an employee of the corporation. An individual, performing
services for a corporation, both as an officer and director, is an employee subject to
withholding on compensation, including director's fees.
SECTION 2.78.4. Employer. — The term employer means any person

for whom an individual performs or performed any service, of whatever nature, under
an employer-employee relationship. It is not necessary that the services be continuing
at the time the wages are paid in order that the status of employer may exist. Thus for
purposes of withholding, a person for whom an individual has performed past
services and from whom he is still receiving compensation is an "employee".
(A) Person for whom the services are or were performed does not have
control. — The term "employer" also refers to the person having control of the
payment of the compensation in cases where the services are or were performed for a
person who does not exercise such control. For example, where compensation, such
as certain types of pensions or retirement pay, are paid by a trust and the person for
whom the services were performed has no control over the payment of such
compensation, the trust is deemed to be the "employer".
(B) Person paying compensation on behalf of a nonresident. — The term

"employer" also means any person paying compensation on behalf of a non-resident
alien individual, foreign partnership, or foreign corporation, who is not engaged in
trade or business within the Philippines.
It is the responsibility of the employer to withhold, pay, or refund the tax and
furnish the statements required under these Regulations. The term "employer" as
defined in (A) and (B) above is intended to determine who is the withholding agent.
As a matter of business administration, certain mechanical details of the

withholding process may be handled by representatives of the employer. Thus, in the
case of a corporate employer with branch offices, the branch manager or other
representative may actually, as a matter of internal administration, withhold the tax or
prepare the statements required under the law. Nevertheless, the legal responsibility
for withholding, paying and returning the tax and furnishing such statements rests
with the corporate employer.
An employer may be an individual, a corporation, a partnership, a trust, an

estate, a joint-stock company, an association, or a syndicate, group, pool, joint
venture, or other unincorporated organization, group or entity. A trust or estate, rather
than the fiduciary acting for or on behalf of the trust or estate, is generally the
employer.
The term "employer" embraces not only an individual and an organization

engaged in trade or business, but it also includes an organization exempt from income
tax, such as charitable and religious organizations, clubs, social organizations and
societes, as well as the Government of the Philippines, including its agencies,
instrumentalities, and political subdivisions.
(C) Compensation paid on behalf of two or more employers. — If a

payment of compensation is made to an employee by an employer through an agent,
fiduciary, or other person who has the control, receipt, custody, or disposal of, or pays
the compensation payable by another employer to such employee, the amount of tax
required to be withheld on each compensation payment made through such agent,
fiduciary, or person shall, whether the compensation is paid separately on behalf of
each employer or paid in lump-sum on behalf of all such employers, be determined
based on the aggregate amount of such compensation payment or payments in the
same manner as if such aggregate amount had been paid by one employer. Hence, the
tax shall be determined based on the aggregate amount of the compensation paid. prcd
In any such case, each employer shall be liable for the return and payment of a
pro-rata portion of the tax so determined in accordance with the ratio of the amount
contributed by each employer relative to the aggregate of such compensation.
A fiduciary, agent, or other person acting for two or more employers may be
authorized to withhold the tax under these regulations with respect to the wages of the
employees of such employers. Such fiduciary, agent, or other person may also be
authorized to make and file returns of the tax withheld at source on such
compensation and to furnish the receipts required under these Regulations.
Application for the authorization to perform such act should be addressed to the
Commissioner or his duly authorized representative. If such authority is granted by
the Commissioner, all provisions of the law (including penalties) and regulations
prescribed in pursuance of the law applicable in respect of an employer for whom
such fiduciary, agent or other person acts shall remain subject to all provisions of law
(including penalties) and regulations prescribed in pursuance of the law applicable in
respect of employers.
SECTION 2.78.5 Computation of Wages. —
The basis of the computation of the minimum wage rates prescribed by

law shall be the normal working time of eight (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. Unless otherwise amended or repealed by subsequent pertinent
laws, rules and regulations, the holiday pay, overtime pay, night shift differential
and hazard pay shall be understood to be computed based on such agreement or
labor law provisions.
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. (Annex "B")
On the first classification, the monthly SMW is computed by multiplying

the applicable daily wage rate by the factor of 261 days and divide the same by
twelve; the semi-monthly at one-half (1/2) of the monthly rate and the weekly
SMW is arrived at by spreading the annual minimum basic wage over fifty-two
(52) weeks. Thus, on a P382.00 minimum daily wage in Metro Manila, the
monthly SMW is P8,308.00, the semi-monthly at P4,154.00 and weekly
P1,917.00.
On the second category, the monthly SMW is computed by multiplying

the applicable daily wage rate by the factor of 313 days and divide the product
by twelve. Hence, on a P382.00 minimum daily wage, the monthly SMW is
P9,964.00, the semi-monthly at P4,982.00 and weekly at P2,300.00.
On the third classification, the monthly SMW is computed by multiplying

the applicable daily wage rate by the factor of 365 days, divided by twelve. Thus,
on a 382 minimum daily wage, the monthly SMW is P11,619.00, the
semi-monthly at P5,810.00 and weekly at P2,681.00.
On the fourth classification, the monthly SMW is computed by

multiplying the applicable daily wage rate by the factor of 392.5 days, divided by
twelve. Hence, on a 382 minimum daily wage, the monthly SMW is P12,495.00,
the semi-monthly at P6,247.00 and weekly at P2,883.00.
SECTION 2.79. Income Tax Collected at Source on Compensation Income.
(A) Requirement of Withholding. — Every employer must withhold

from compensation paid an amount computed in accordance with these Regulations,
whether the employee is a citizen or an alien, except non-resident alien not
engaged in trade or business. Provided, that no withholding of tax shall be required
on the SMW, including holiday pay, overtime pay, night shift differential and hazard
pay of MWEs in the private/public sectors as defined in these Regulations. Provided,
further, that an employee who receives additional compensation such as commissions,
honoraria, fringe benefits, benefits in excess of the allowable statutory amount of
P90,000.00, taxable allowances and other taxable income other than the SMW,
holiday pay, overtime pay, hazard pay and night shift differential pay, shall be
taxable only on such additional compensation received.
(B) Computation of Withholding Tax on Compensation Income in General.

— The procedures prescribed below below shall govern the computation of
withholding tax on the taxable compensation income of the employees. Provided,
however, that taxable fringe benefits received by employees other than the rank and
file, as defined in the Labor Code of the Philippines, as amended, shall be subject to
Fringe Benefits Tax, pursuant to Sec. 33 of the Tax Code, as amended.
(1) Use of Withholding Tax Tables. — In general, every employer

making payment of compensation shall deduct and withhold from such compensation
a tax determined in accordance with the prescribed withholding tax table, Annex
"D" for compensation paid from January 1, 2018 until December 31, 2022 (as
published under RMC 1-2018 dated January 4, 2018) and Annex "E" for
compensation paid starting January 1, 2023.
There are four (4) withholding tables prescribed in these regulations, as

follows:
(a) Monthly Tax Table — to be used by employers using the monthly

payroll period;
(b) Semi-Monthly Tax Table — to be used by employers using the

semi-monthly payroll period;
(c) Weekly Tax Table — to be used by employers using the weekly

payroll period;
(d) Daily Tax Table — to be used by employers using the daily payroll
period.
If the compensation is paid other than daily, weekly, semi-monthly or monthly,

the tax to be withheld shall be computed as follows:
(a) Annually — use the annualized computation referred to in Sec.

2.79 (B)(5)(b) of these regulations;
(b) Quarterly and semi-annually — divide the compensation by three

(3) or six (6), respectively, to determine the average monthly
compensation. Use the monthly withholding tax table to compute
the tax, and the tax so computed shall be multiplied by three (3) or
six (6) accordingly.
(2) Components of Withholding Tax Table. —
(a) Column 1 pertains to the following details:
i. Payroll period
ii. Compensation range
iii. Prescribed withholding tax
(b) Columns 2 to 7 show the tax due for each of the compensation
range identified.
(3) Steps to Determine the Amount of Tax to Be Withheld:
Step 1. Determine the total monetary and non-monetary compensation
paid to an employee for the payroll period: monthly, semi-monthly, weekly or daily,
as the case may be, excluding non-taxable benefits and mandatory contributions.
Classify taxable compensation into regular and supplementary

compensation. Regular compensation includes basic salary, fixed allowances for
representation, transportation and other allowances paid to an employee per
payroll period. Supplementary compensation includes payments to an employee
in addition to the regular compensation, such as commission, overtime pay,
taxable retirement, taxable bonus, and other taxable benefits, with or without
regard to a payroll period.
Representation and Transportation Allowances (RATA) granted to public

officers and employees under the General Appropriations Act and the Personnel
Economic Relief and Allowance (PERA) which essentially constitute
reimbursement for expenses incurred in the performance of government
personnel's official duties shall not be subject to income tax and consequently to
withholding tax.
Step 2. Use the appropriate table in Annex "D" (for compensation

paid from January 1, 2018 to December 31, 2022) or Annex "E" (for
compensation paid from January 1, 2023 onwards) and select the applicable
payroll period.
Step 3. Determine the compensation range of the employee by taking

into account only the total amount of taxable regular compensation income and
apply the applicable tax rates prescribed thereon.
Step 4. Compute the withholding tax due by adding the tax

predetermined in the compensation range as indicated on the column used and
the rate of tax on the excess of the total compensation over the minimum of the
compensation range.
(4) Sample Computations on the Use of the Withholding Tax Tables:
The following are sample computations of withholding tax on

compensation using the prescribed withholding tax tables:
Illustration 6: Ms. Joc, an employee of MCUD, Inc., is receiving daily

compensation in the amount of P2,500, net of mandatory
contributions.
Computation:
By using the daily withholding tax table, the withholding tax

beginning January 2018 is computed by referring to compensation
range under column 4 which shows a predetermined tax of P356.16
on P2,192 plus 30% of the excess of Compensation Range (Minimum)
amounting to P308 (P2,500.00 - P2,192.00), which is P92.40. As such,
the withholding tax to be withheld by the employer shall be P448.56.
Total taxable compensation P2,500.00

Less: Compensation Range (Minimum) 2,192.00
–––––––––
Excess P308.00
–––––––––
Withholding tax shall be computed as follows:
Predetermined Tax on P2,192.00 P356.16
Add: Tax on the excess (P308.00 x 30%) 92.40
–––––––––
Total daily withholding tax P448.56
========
Illustration 7: Ms. Haidee, an employee of GEAL Corp., is receiving

weekly compensation in the amount of P9,500, net of mandatory
contributions.
Computation:
By using the weekly withholding tax table, the withholding tax

range under column 3 which shows a predetermined tax of P576.92
on P7,692 plus 25% of the excess of Compensation Range (Minimum)
amounting to P1,808 (P9,500.00 - P7,692.00), which is P452. As such,
the withholding tax to be withheld by the employer shall be
P1,028.92.
–––––––––
Excess P1,808.00
–––––––––
Add: Tax on the excess (P1,808.00 x 25%) 452.00
–––––––––
Total weekly withholding tax P1,028.92
========
Illustration 8: Ms. Rose, an employee of JMLH Company, is

receiving semi-monthly compensation in the amount of P15,500, net
of mandatory contributions.
Computation:
By using the semi-monthly withholding tax table, the withholding tax

range under column 2 which shows a predetermined tax of P0 on
P10,417 plus 20% of the excess of Compensation Range (Minimum)
amounting to P5,083 (P15,500.00 - P10,417.00), which is P1,016.60. As
such, the withholding tax to be withheld by the employer shall be
P1,016.60.

–––––––––
Excess P5,083.00
––––––––––
Add: Tax on the excess (P5,083.00 x 20%) 1,016.60
––––––––––
Total semi-monthly withholding tax P1,016.60
=========
Illustration 9: Ms. Lyn, an employee of MAG Corp. is receiving
regular monthly compensation in the amount of P165,000, net of
mandatory contributions, with supplemental compensation in the
amount of P5,000 for the month.
Computation:
By using the monthly withholding tax table, the withholding tax

range under column 4 which shows a predetermined tax of
P10,833.33 on P66,667 plus 30% of the excess of Compensation
Range (Minimum) amounting to P103,833 (P165,000.00 - P66,667.00
+ P5,000), which is P30,999.90. As such, the withholding tax to be
withheld by the employer shall be P43,659.89.

––––––––––
Excess P98,333.00
Add: Supplemental Compensation 5,000.00
––––––––––
Total P103,333.00
––––––––––
On P66,667.00 P10,833.33
On Excess (P165,000.00 - P66,667.00 + 30,999.90
Supplemental compensation of P5,000.00) x
30%
––––––––––
Total monthly withholding tax P41,833.23
=========
(5) Use of Exceptional Computations
(a) Cumulative average method. — If in respect of a particular employee, the

regular compensation is exempt from withholding tax because the amount thereof is
below the compensation level, but supplementary compensation is paid during the
calendar year; or the supplementary compensation is equal to or more than the regular
compensation to be paid; or the employee was newly hired and had a previous
employer/s within the calendar year, other than the present employer doing this
cumulative computation, the present employer shall determine the tax to be deducted
and withheld in accordance with the cumulative average method provided hereunder:
Step 1. Add the amount of taxable regular and supplementary

compensation to be paid to an employee for the payroll period subject of computation
to the sum of the taxable regular and supplementary compensation since the
beginning of the current calendar year including the compensation paid by the
previous employers within the same calendar year, if any;
Step 2. Divide the aggregate amount of compensation computed in step 1

by the number of payroll period to which the amount relates;
Step 3. Compute the tax to be deducted and withheld on the cumulative

average compensation determined in Step No. (2) in accordance with the withholding
tax table; cdphil
Step 4. Multiply the tax computed in Step No. (3) by the number of
payroll period to which it relates;
Step 5. Determine the excess, if any, of the amount of tax computed in

Step No. (4) over the total amount of tax already deducted and withheld from the
beginning payroll period to the last payroll period, including that withheld by the
previous employer/s within the calendar year, if any. The excess, as computed, shall
be deducted and withheld from the compensation to be paid for the last payroll period
of the current calendar year.
The cumulative average method, once applicable to a particular employee at

any time during the calendar year, shall be the same method to be consistently used
for the remaining payroll period/s of the same calendar year.
EXAMPLE IV: The regular compensation is exempt from withholding tax but
supplementary compensation (commission) is paid during the calendar year.
Employee A, married, with three (3) qualified dependents (ME3), received the
following compensation beginning January, 2009.
Month Regular Supplementary Total

Compensation Compensation Compensation
January P8,500.00 P15,000.00 P23,500.00
February P8,500.00 P15,000.00 P23,500.00
March P8,400.00 P15,500.00 P23,900.00
COMPUTATION:
1. For Jan. P23,500.00 + 0 = P23,500.00
For Feb. P23,500.00 + 23,500.00 = P47,000.00
For Mar. P23,500.00 + 23,500.00 + 23,900.00 = P70,900.00
2. For Jan. P23,500.00/1 = P23,500.00
For Feb. P47,000.00/2 = P23,500.00
For Mar. P70,900.00/3 = P23,633.33
3. For January
Tax on P22,083.00 (Line B.3, Col. 6) = P1,875.00
Tax on excess (P1,417.00 x 25%) = P354.25
–––––––––
Tax on P23,500.00 P2,229.25
========
For February
Tax on excess (P1,417.00 x 25%) = 354.25
–––––––––
Tax on P23,500.00 = P2,229.25
========
For March
Tax on excess (P1,550.33 x 25%) = 387.58
––––––––
Tax on P23,633.33 = P2,262.58
=======
4. For Jan. P2,229.25 x 1 = P2,229.25
For Feb. P2,229.25 x 2 = P4,458.50
For Mar. P2,262.58 x 3 = P6,787.74
5. For Jan. P2,229.25 – 0 = P2,229.25
For Feb. P4,458.50 – 2,229.25 = P2,229.25
For Mar. P6,787.74 – 4,458.50 = P2,329.24
EXAMPLE V: Supplementary compensation is equal to or more than the

regular compensation received:
Employee B, married with three (3) qualified dependents (M3) whose spouse
is also employed, received the following compensation beginning January, 2009.
January P11,000.00 P11,000.00 P22,000.00

February P11,000.00 P11,500.00 P22,500.00
March P11,000.00 P12,000.00 P23,000.00
COMPUTATION:
1. For Jan. P22,000.00 + 0 = P22,000.00
For Feb. P22,000.00 + 22,500.00 = P44,500.00
For Mar. P22,000.00 + 22,500.00 + 23,000.00 = P67,500.00
2. For Jan. P22,000.00/1 = P22,000.00
For Feb. P44,500.00/2 = P22,250.00
For Mar. P67,500.00/3 = P22,500.00
3. For January
Tax on P16,250.00 (Line B.3, Col. 5) = P708.33
Tax on excess (P5,750.00 x 20%) = P1,150.00
–––––––––
Tax on P22,000.00 P1,858.33
========
For February
Tax on excess (P167 x 25%) = P41.75
–––––––––
Tax on P22,250.00 = P1,916.75
========
For March
Tax on excess (P417 x 25%) = P104.25
––––––––
Tax on P22,500.00 = P1,979.25
=======
4. For Jan. P1,858.33 x 1 = P1,858.33
For Feb. P1,916.75 x 2 = P3,833.50
For Mar. P1,979.25 x 3 = P5,937.75
5. For Jan. P1,858.33 – 0 = P1,858.33
For Feb. P3,833.50 – 1,858.33 = P1,975.17
For Mar. P5,937.75 – 3,833.50 = P2,104.25
EXAMPLE VI: A newly hired employee with previous employer within the
calendar year 2009.
Employee C, single, was hired by Z Company on July 6, 2009. Her total
taxable income per month is P15,000.00. She was previously employed by X
Company from January to June 30, 2009 with a monthly taxable income of
P13,000.00 or P13,000.00 x 6 months = P78,000 for 6 months. Per BIR Form No.
2316 (Certificate of Compensation Payment/Tax Withheld) issued by the previous
employer, which was presented by Employee C to her present employer, the total tax
withheld is P7,849.98. In computing for the tax withheld on the compensation of
Employee C starting the month of July 6, 2000, Z Company shall use the cumulative
average method.
Month Present Total Total

Compensation Previous Taxable
Income Income Income
July 6 P15,000.00 P78,000.00 P93,000.00

August 15,000.00 15,000.00
September 15,000.00 15,000.00
October 15,000,00 15,000.00
November 15,000.00 15,000.00
December 15,000.00 15,000.00
––––––––– –––––––––– –––––––––––
P90,000.00 P78,000.00 P168,000.00
========= ========= =========
COMPUTATION:
STEP 1 —
For July 6 P15,000.00 + P78,000.00 = P93,000.00
For Aug. P93,000.00 + P15,000.00 = P108,000.00
For Sep. P93,000.00 + P15,000.00 + P15,000.00 = P123,000.00
For Oct. P93,000.00 + P15,000.00 + P15,000.00 + P15,000.00 = P138,000.00
For Nov. P93,000.00 + P15,000.00 + P15,000.00 + P15,000.00 + P15,000.00 = P153,000.00
STEP 2 —
For July 6 P93,000.00/7 = P13,285.71
For Aug. P108,000.00/8 = P13,500.00
For Sep. P123,000.00/9 = P13,666.67
For Oct. P138,000.00/10 = P13,800.00
For Nov. P153,000.00/11 = P13,909.09
STEP 3 —
For July 6 P13,285.71
Tax On P10,000.00 = P708.33
Tax On Excess (P3,285.71 x 20%) 657.14
––––––––
Tax On P13,285.71 = P1,365.47
========
For August P13,500.00
Tax On P10,000.00 = P708.33
Tax On Excess (P3,500.00 x 20%) 700.00
––––––––
Tax On P13,500.00 = P1,408.33
========
For Sept. P13,666.67
Tax On P10,000.00 = P708.33
Tax On Excess (P3,666.67 x 20%) 733.33
––––––––
Tax On P13,666.67 = P1,441.66
========
For October P13,800.00
Tax On P10,000.00 = P708.33
Tax On Excess (P3,800.00 x 20%) = 760.00
––––––––
Tax On P13,800.00 = P1,468.33
========
For November P13,909.09
Tax On P10,000.00 = P708.33
Tax On Excess (P3,909.09 x 20%) = 781.82
––––––––
Tax On P13,818.18 = P1,490.15
========
STEP 4 —
For July 6 P1,365.47 x 7 = P9,558.29
For August 1,408.33 x 8 = P11,266.64
For September 1,441.66 x 9 = P12,974.94
For October 1,468.33 x 10 = P14,683.30
For November 1,490.15 x 11 = P16,391.65
Step 5 —
For July 6 P9,558.29 - P7,849.98 = P1,708.31
For August 11,266.64 - P9,558.29 = P1,708.35
For September 12,974.94 - P11,266.64 = P1,708.30
For October 14,683.30 - P12,974.94 = P1,708.36
For November 16,391.65 - P14,683.30 = P1,708.35
Illustration 10: The regular compensation is exempt from

withholding tax but supplementary compensation (commission) is
paid during the calendar year.
Ms. Rose received the following compensation beginning January,

2018.

January P15,000 P20,000 P35,000
February 15,000 15,000 30,000
March 15,000 25,000 40,000
Computation:
Using the Revised Withholding Tax Table in Annex "D", the taxes to
be withheld for each month following the step-by-step procedures
enumerated above:
1. For January P35,000.00 + 0 = P35,000.00

For February 35,000.00 + 30,000.00 = 65,000.00
For March 35,000.00 + 30,000.00 + 40,000.00 = 105,000.00
2. For January P35,000.00 ÷ 1 = P35,000.00

For February 65,000.00 ÷ 2 = 32,500.00
For March 105,000.00 ÷ 3 = 35,000.00
3. For January:
Tax on P33,333 P2,500.00
Tax on excess (P35,000 - 33,333) x 25% 416.75
––––––––––
Tax on P35,000 P2,916.75
=========
For February:
Tax on P20,833 P0.00
Tax on excess (P32,500 - 20,833) x 20% 2,333.40
––––––––––
Tax on P32,500 P2,333.40
––––––––––
For March:
Tax on P33,333 P2,500.00
Tax on excess (P35,000 - 33,333) x 25% 416.75
––––––––––
Tax on P35,000 P2,916.75
=========
4. For January P2,916.75 x 1 = P2,916.75

For February 2,333.40 x 2 = 4,666.80
For March 2,916.75 x 3 = 8,750.25
5. Tax to be withheld monthly:

For January P2,916.75 - 0 = P2,916.75
For February 4,666.80 - 2,916.75 = 1,750.05
For March 8,750.25 - 4,666.80 = 4,083.45
Illustration 11: Supplementary compensation is equal or more than

the regular compensation received.
Ms. Aimee received the following compensation beginning January,

2018.

January P15,000 P15,000 P30,000
February 15,000 15,000 30,000
March 15,000 20,000 35,000
Computation:
previously enumerated:
1. For January P30,000.00 + 0 = P30,000.00

For February 30,000.00 + 30,000.00 = 60,000.00
For March 30,000.00 + 30,000.00 + = 95,000.00
35,000.00
2. For January P30,000.00 ÷ 1 = P30,000.00

For February 60,000.00 ÷ 2 = 30,000.00
For March 95,000.00 ÷ 3 = 31,666.67
3. For January:
Tax on P20,833 P0.00
Tax on excess (P30,000 - 20,833) x 20% 1,833.40
––––––––––
Tax on P30,000 P1,833.40
=========
For February:
Tax on P20,833 P0.00
Tax on excess (P30,000 - 20,833) x 20% 1,833.40
––––––––––
Tax on P30,000 P1,833.40
=========
For March:
Tax on P20,833 P0.00
Tax on excess (P31,666.67 - 20,833) x 20% 2,166.73
––––––––––
Tax on P31,666.67 P2,166.73
=========
4. For January P1,833.40 x 1 = P1,833.40

For February 1,833.40 x 2 = 3,666.80
For March 2,166.73 x 3 = 6,500.19
5. Tax to be withheld monthly:

For January P1,833.40 - 0 = P1,833.40
For February 3,666.80 - 1,833.40 = 1,833.40
For March 6,500.19 - 3,666.80 = 2,833.39
Illustration 12: A newly hired employee with previous employer

within the calendar year 2018.
Ms. Leni was hired by JPL Corporation on July 6, 2018. Her total
taxable income per month is P35,000. She was previously employed
by ENA Company from January to June 30, 2018 with a monthly
taxable income of P30,000 or P180,000 for six (6) months. Per BIR
Form No. 2316 (Certificate of Compensation Payment/Tax Withheld)
issued by the previous employer, which was presented by Ms. Leni to
her present employer, the total tax withheld is P11,000.40. In
computing for the tax withheld on the compensation of Ms. Leni
starting the month of July 6, 2018, JPL Corporation shall use the
cumulative average method.
Month Present Total Previous Total Taxable

July 6 P35,000 P180,000 P215,000
August 35,000 35,000
September 35,000 35,000
October 35,000 35,000
November 35,000 35,000
December 35,000 35,000
–––––––– –––––––– ––––––––
Total P210,000 P180,000 P390,000
======= ======= =======
Computation:
previously enumerated:
1. For July 6 P35,000 + 180,000 = P215,000.00

For August 215,000 + 35,000 = 250,000.00
For September 215,000 + 35,000 + 35,000 = 285,000.00
For October 215,000 + 35,000 + 35,000 + 35,000 = 320,000.00
For November 215,000 + 35,000 + 35,000 + 35,000 + 35,000 = 355,000.00
2. For July 6 P215,000.00 ÷ 7 = P30,714.29
For August 250,000.00 ÷ 8 = 31,250.00
For September 285,000.00 ÷ 9 = 31,666.67
For October 320,000.00 ÷ 10 = 32,000.00
For November 355,000.00 ÷ 11 = 32,272.73
3. For July 6:
Tax on P20,833 P0.00
Tax on Excess (P30,714.29 - 20,833) x 20% 1,976.25
––––––––––
Tax on P30,714.29 P1,976.25
=========
For August:
Tax on P20,833 P0.00
Tax on excess (P31,250 - 20,833) x 20% 2,083.40
––––––––––
Tax on P31,250 P2,083.40
=========
For September:
Tax on P20,833 P0.00
Tax on excess (P31,666.67 - 20,833) x 20% 2,166.73
––––––––––
Tax on P31,666.67 P2,166.73
=========
For October:
Tax on P20,833 P0.00
Tax on excess (P32,000 - 20,833) x 20% 2,233.40
––––––––––
Tax on P32,000 P2,233.40
=========
For November:
Tax on P20,833 P0.00
Tax on excess (P32,272.73 - 20,833) x 20% 2,287.95
––––––––––
Tax on P32,272.73 P2,287.95
=========
4. For July 6 P1,976.25 x 7 = P13,833.75

For August 2,083.40 x 8 = 16,667.20
For September 2,166.73 x 9 = 19,500.57
For October 2,233.40 x 10 = 22,334.00
For November 2,287.95 x 11 = 25,167.45
5. For July 6 P13,833.75 - 11,000.40 = P2,833.35

For August 16,667.20 - 13,833.75 = 2,833.45
For September 19,500.57 - 16,667.20 = 2,833.37
For October 22,334.00 - 19,500.57 = 2,833.43
For November 25,167.45 - 22,334.00 = 2,833.45
(b) Annualized withholding tax method. — (1) When the employer-employee

relationship is terminated before the end of the calendar year; and (2) when computing for the
year-end adjustment, the employer shall determine the amount to be withheld from the
compensation on the last month of employment or in December of the current calendar year in
accordance with the following procedures:
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 regular and supplementary compensation paid to the employee
by the present employer doing the annualized computation to the taxable
compensation income received from previous employer/s during the calendar year:
(a) When the employer-employee relationship is terminated before

December — The taxable regular and supplementary
compensation income shall be the amount paid since the beginning
of the current calendar year to the termination of employment.
(b) Year-end adjustment — The taxable regular and supplementary

compensation income shall be the amount paid since the beginning
of the current calendar year to December.
(c) Taxable fringe benefits received by employees holding managerial

or supervisory positions shall be subject to a final fringe benefit tax
as prescribed in Section 2.57.1 (G) hereof. Hence, the same
shall not form part of the taxable supplementary compensation of
managers and supervisors, subject to tax using the withholding tax
tables.
Step 3. Compute the amount of tax on the amount arrived in Step 2, in

accordance with the applicable schedules, as follows:
(a) For compensation income earned for taxable years 2018 to 2022:
RANGE OF TAXABLE TAX DUE = a + (b x c)

INCOME
OVER NOT OVER BASIC ADDITIONAL OF EXCESS
AMOUNT RATE OVER
(a) (b) (c)
- 250,000.00 - -
250,000.00 400,000.00 - 20% 250,000.00
400,000.00 800,000.00 30,000.00 25% 400,000.00
800,000.00 2,000,000.00 130,000.00 30% 800,000.00
2,000,000.00 8,000,000.00 490,000.00 32% 2,000,000.00
8,000,000.00 - 2,410,000.00 35% 8,000,000.00
(b) For compensation income earned for taxable year 2023 and onwards:
RANGE OF TAXABLE TAX DUE = a + (b x c)

INCOME
OVER NOT OVER BASIC ADDITIONAL OF EXCESS
AMOUNT RATE OVER
(a) (b) (c)
- 250,000.00 - -
250,000.00 400,000.00 - 15% 250,000.00
400,000.00 800,000.00 22,500.00 20% 400,000.00
800,000.00 2,000,000.00 102,500.00 25% 800,000.00
2,000,000.00 8,000,000.00 402,500.00 30% 2,000,000.00
8,000,000.00 - 2,202,500.00 35% 8,000,000.00
Step 4. *(5) Determine the deficiency or excess, if any, of the tax computed in
Step 3 over the cumulative withholding tax already deducted and withheld since the
beginning of the current calendar year. The deficiency withholding tax (when the
amount of tax computed in Step 3 is greater than the amount of cumulative tax
already deducted and withheld or when no tax has been withheld from the beginning
of the calendar year) shall be withheld from the last payment of compensation for the
calendar year. If the deficiency withholding tax is more than the amount of the last
compensation to be paid to an employee, the employer shall be liable to pay the
amount of tax which cannot be withheld from the employee's last compensation for
the year. The obligation of the employee to the employer arising from the advances
made by the employer of the amount of the required tax is a matter of settlement
between the employee and employer.
The excess withholding tax (when the amount of cumulative tax already
deducted and withheld is greater than the tax computed in Step 3) shall be credited or
refunded to the employee not later than January 25 of the following year. However, in
case of termination of employment before December, the refund shall be given to the
employee at the payment of the last compensation during the year. In return, the
employer is entitled to deduct the amount refunded to the employee/s from the
remittable amount of taxes withheld from compensation income for the current month
in which the refund was made, and in the succeeding months thereafter until the
amount refunded by the employer is fully repaid.
The annualized computation done for each employee shall be reflected by the
employer at the alphabetical list attached to BIR Form No. 1604-CF.
Illustration 13: Mr. Bembem receives P120,000 as monthly regular

compensation (net of SSS/GSIS, PHIC, HDMF employee share only)
starting January 1, 2018 from AMBS Company. On June 1, 2018, he
filed his resignation effective June 30, 2018. He was unemployed for
the rest of the year. The tax withheld from January 1 to May 31, 2018
was P134,164.50.
Computation:
For the period of employment —

Total Regular Compensation (Jan. 1 to May 31, 2018) P600,000.00
Add: Regular Compensation to be received on June 120,000.00
–––––––––––
Total Taxable Compensation Income (Jan.-June, 2018) P720,000.00
–––––––––––
Total Income Tax Due:
On P400,000.00 P30,000.00
Tax on Excess (P720,000.00 - P400,000.00) x 25% 80,000.00
–––––––––––
Total tax due P110,000.00
Less: Tax Withheld from January to May 134,164.50
–––––––––––
Amount to be refunded by the employer to Mr. Bembem (P24,164.50)
==========
Illustration 14: Mr. Joey receives P120,000 as monthly regular

compensation (net of SSS/GSIS, PHIC, HDMF — all are employee
share only) starting January 1, 2018 from CCF Corp. On June 1,
2018, he filed his resignation effective June 30, 2018 and was
subsequently re-employed in EBQ Company on July 1, 2018 with a
monthly compensation of P130,000. He furnished his new employer
with the BIR Form 2316 from CCF Corp., his old employer, which
showed that the amount he received from the said previous employer
was P720,000 with tax withheld of P134,164.50. On December 15,
2018, he received commissions of P15,000 from his new employer. His
new employer withheld P178,997.40 from his income.
Computation:
Total Compensation Received from previous employer P720,000.00

(Jan. 1 to Jun. 30, 2018)
Add: Regular Compensation from the new employer 780,000.00
(Jul. 1 to Dec. 31, 2018)
––––––––––––
Total Taxable Compensation Income P1,500,000.00
Add: Supplementary Income (Commissions) 15,000.00
––––––––––––
Total Taxable Compensation Income P1,515,000.00
===========
Tax Due:
On P800,000.00 P130,000.00
On Excess (P1,515,000.00 - P800,000.00) x 30% 214,500.00
––––––––––––
Total tax due P344,500.00
Less: Tax withheld (P134,164.50 + P178,997.40) 313,161.90
––––––––––––
Amount to be deducted by EBQ Company from P31,338.10
Mr. Joey for December 2018
===========
Illustration 15: (YEAR-END ADJUSTMENTS COMPUTATION)

for taxable year 2018, EBQ Company's records reflected the
following:
1. Ms. Grace received the following compensation for the year:
a. Monthly Basic Salary — P50,000.00
b. Overtime pay for November — 10,000.00
c. Thirteenth Month Pay — 50,000.00
d. Other Benefits — 10,000.00
e. Withholding Tax (Jan.-Nov.) — 73,334.25
Computation:
Total Income Received for the year:

Basic salary (P50,000 x 12 mos.) P600,000.00
Overtime pay (November) 10,000.00
13th Month pay 50,000.00
Other Benefits 10,000.00
–––––––––––
Total Income Received for the year 670,000.00
Less: Non-Taxable Income
Other benefits 10,000.00 60,000.00
––––––––––– –––––––––––
Total Taxable Compensation Income P610,000.00
–––––––––––
Tax Due:
On P400,000.00 P30,000.00
On excess (P610,000.00 - P400,000.00) x 52,500.00
25%
–––––––––––
Total Tax due 82,500.00
Less: Tax withheld (January-November) 73,334.25
–––––––––––
Amount to be withheld in December 2018 P9,165.75
==========
2. Mr. Gerry, hired on July 1, 2018, received the following

compensation for the year:
a. Monthly Basic Salary — P25,000.00
b. Thirteenth Month Pay — 25,000.00
c. Other Benefits — 5,000.00
d. Salary from previous employer (Jan.-May 2018)

— 125,000.00
e. Withholding tax from previous employer —

4,167.00
f. Withholding tax (Jul.-Nov.) — 4,167.00
Computation:
Total Income Received for the year:
Salary from previous employer P125,000.00
Salary from present employer 150,000.00
Other Benefits 5,000.00
–––––––––––
Total Income Received for the year 305,000.00
Less: Non-Taxable Income
Other benefits 5,000.00 30,000.00
––––––––– –––––––––––
Total Taxable Compensation Income P275,000.00
–––––––––––
Tax Due:
On P250,000.00 P0.00
On excess (P275,000.00 - P250,000.00) x 20% 5,000.00
–––––––––––
Total Tax due P5,000.00
Less: Tax withheld by previous employer 4,167.00
(January-May)
Tax withheld by present employer 4,167.00 8,334.00
(July-November)
––––––––– –––––––––––
Amount to be refunded to Mr. Gerry (P3,334.00)
==========
* The annualized computation done for each employee shall be reflected by the
employer at the alphabetical list of employees required to be attached to BIR
Form No. 1604C. The list shall be submitted in electronic form.
(c) If the compensation is paid other than daily, weekly, semi-monthly or

monthly, compute the tax to be deducted and withheld as follows:
a) Annually — refers to computation on annualized income;
b) Quarterly and semi-annually — divide the compensation by three

(3) or six (6), respectively, to determine the average monthly
compensation. Use the monthly withholding tax table to compute
the tax, and the tax so computed shall be multiplied by three (3) or
six (6), accordingly; LLjur
c) Bi-weekly — divide the compensation by two (2) to determine the

average weekly compensation. Use the weekly withholding tax
table to compute the tax, and the tax so computed shall be
multiplied by two (2);
d) Miscellaneous — if compensation is paid irregularly, or for a

period other than those mentioned above, divide the compensation
by the number of days from last payment to date of payment
(excluding Sundays and holidays). Use the daily tax table, the tax
so computed shall be multiplied by the number of days.
(C) Computation of Withholding Tax on Compensation and Benefits Received

by Employees other than Rank and File Employees. — The procedures provided
herein below shall govern the computation of withholding tax on the taxable
compensation income of employees other than the rank and file pursuant to Sec. 2.79
(B) of these regulations:
(1) Determine the total monetary and non-monetary compensation,

segregating gross benefits which includes thirteenth (13th) month pay, productivity
incentives, Christmas bonus and fringe benefits received by the employee per payroll
period. When computing under the annualized computation, the total monetary and
non-monetary compensation shall be that received for the calendar year. Gross
benefits received by officials and employees of public and private entities shall be
exempted from income tax and withholding tax; provided that the amount of
exemption shall not exceed ninety thousand pesos (P90,000); llcd
(2) Segregate the taxable from the non-taxable compensation (excluding the
fringe benefits) paid to the employee. The taxable income refers to all
remuneration paid to an employee not otherwise exempted by law from income tax
and consequently from withholding tax. The non-taxable income are those which are
specifically exempted from income tax by the Code or other special laws as listed in
Sec. 2.78.1 (B) hereof (e.g., benefits not exceeding P90,000, non-taxable retirement
benefits and separation pay);
(3) Segregate the taxable fringe benefit and subject the same to
withholding pursuant to Subsection D of this section of the Regulations;
(4) Compute withholding tax on the taxable regular and supplementary
compensation in accordance with the procedures prescribed in Sec. 2.79(B)(1) of
these regulations, for purposes of withholding per payroll period and for
purposes of computing under the cumulative average method or for the year-end
adjustment.
(D) Computation of Withholding Tax on Fringe Benefit. —
(1) Final withholding tax on Fringe Benefits paid to employees other than
rank and file. — There shall be imposed a final tax of thirty-five percent (35%) on
the grossed-up monetary value of fringe benefits granted or furnished by the
employer to his employees (except rank and file employees) unless the fringe benefit
is required by the nature of or necessary to the trade, business or profession of the
employer, and when the fringe benefit is for the convenience and advantage of the
employer.
The fringe benefit tax shall be paid by the employer in the same manner as
provided in Sec. 2.58 of these Regulations. It shall not form part of the gross income
of the employee.
(2) Grossed-up monetary value of Fringe Benefits. — In

general the grossed-up monetary value of the fringe benefit
shall be determined by dividing the monetary value of the
fringe benefit by sixty-five percent (65%). The grossed-up
monetary value of the fringe benefits furnished to the employees
who are taxable under subsection B of Section 25 of the
Tax Code, as amended, shall be determined by dividing the
monetary value of the fringe benefit by the difference between one
hundred percent (100%) and the applicable rates of income tax
prescribed on the aforesaid sub-section of Section 25, to wit: cdasia
Subsection (B) — Twenty-five percent on income

derived from sources within the Philippines by a
non-resident alien individual not engaged in trade or
business in the Philippines.
(3) Non-taxable Fringe Benefits. — The following fringe benefits are

not subject to the fringe benefits tax.
(a) Fringe benefits paid to rank and file employees. — Fringe benefits
furnished or granted to rank and file employees shall form part of
the employees gross compensation income subject to the
withholding tax table on compensation under Section 2.79 (B) of
these Regulations.
(b) Fringe benefits which are authorized and exempted from income
tax and consequently from withholding tax under the Code, as
amended, or under any special law.
(c) Contributions of the employer for the benefit of the employee to

retirement, insurance and hospitalization benefit plans.
(d) De minimis benefits. For purposes of determining whether the

fringe benefit shall be considered payments of de minimis benefits,
the employer shall submit a written representation to the
Commissioner for the issuance of a ruling taking into account the
peculiar nature and special need of the said employer's trade,
business or profession.
The term "de minimis benefits" which is exempt from the fringe benefit tax
shall, in general, be limited to facilities or privileges (such as entertainment,
Christmas party and other cases similar thereto; medical and dental services; or the
so-called courtesy discount on purchases), furnished or offered by an employer to his
employees, provided such facilities or privileges are of relatively small value and are
offered or furnished by the employer merely as a means of promoting the health,
goodwill, contentment, or efficiency of his employees.
Illustration 16: WBV Company (a domestic employer/company)

granted Ms. Leni (a Filipino branch manager employee), in addition
to her basic salaries, P5,000 cash per quarter for her personal
membership fees at Country Golf Club. The Fringe Benefits Tax
(FBT) shall be computed as follows:
Monetary value of fringe benefit: P5,000.00

Percentage divisor applicable: 65%
FBT rate: 35%
FBT = (Monetary value of fringe benefit ÷ 65%) x 35%

FBT = (P5,000.00 ÷ 65%) x 35%
FBT = P7,692.31 x 35%
FBT = P2,692.31
Illustration 17: Same facts but the employee is a non-resident alien
individual not engaged in trade or business within the Philippines:
Monetary value of fringe benefit: P5,000.00

Percentage divisor applicable: 75%
Fringe benefit tax rate: 25%
FBT = (Monetary value of fringe benefit ÷ 75%) x 25%

FBT = (P5,000.00 ÷ 75%) x 25%
FBT = P6,666.67 x 25%
FBT = P1,666.67
(E) Computation of Withholding Tax on Employees of Area or Regional

Headquarters of Multinational Corporations, ROHQs, OBUs and Petroleum
Service Contractors and Sub-contractors. — The manner and regular rates of
withholding tax on citizens and resident individuals under Section 2.79(B) hereof
shall apply.
(F) Requirement for Deductibility. — The provisions of Sec. 2.58.5 of

RR 2-98, as amended, shall apply. Provided, that compensation income where no
income taxes were withheld pursuant to Section 2.79 (A) of these regulations,
shall be allowed as deduction from an employer's gross income when the
required employees withholding statement (BIR Form No. 2316) have been
issued to subject employees in accordance with Sec. 2.83.1 of RR 2-98, as
amended. Provided, further, that the Alphabetical List of the subject employees,
including MWEs, shall be submitted under BIR Form No. 1604-CF in
accordance with Sec. 2.83.2 of RR 2-98, as amended.
(G) Tax Paid by Recipient. — The provisions of Sec. 2.58.6 of these

Regulations shall apply.
(H) Non-deductibility of Tax and Credit for Tax Withheld. — The tax
deducted and withheld at source on compensation income shall neither be allowed as
a deduction from the employer's gross income nor from the recipient's gross
compensation income. The entire amount of the compensation from which the tax is
withheld shall be included in gross income to be reported in the return required to be
made by the recipient of the income without deduction for such tax. The creditable
tax withheld at source, however, is allowable as a credit against the tax imposed by
the NIRC to the recipient of the income. Any excess of the tax withheld at source,
over the tax ascertained to be due on the income tax return shall be refunded or
automatically credited, at the taxpayer's option, to the recipient of the income. Such
refund or credit shall be without prejudice to whatever adjustments may be proper
after field investigation or upon information relative to the taxpayer's income tax
liability under the main provisions of the Code, as amended. If the tax has actually
been withheld at source, a credit or a refund shall be made to the recipient of the
income even though such withheld tax has not been paid to the government by the
employer. For the purpose of the credit, the recipient of the income is the person
subject to tax, on whose compensation the tax was withheld. cdtai
Any excess of the tax which was withheld on compensation over the tax due
from the taxpayer shall be returned not later than July 15 of the following year.
Refunds made after such time shall earn interest at the rate of six percent (6%) per
annum, starting after the lapse of the three month period up to the date when the
refund is made.
Refunds shall be made upon warrants drawn by the Commissioner or by his

authorized representative without the necessity of counter-signature by the Chairman,
Commission on Audit or the latter's duly authorized representative as an exception to
the requirement prescribed by Section 49, Chapter 8, Subtitle B, Title I of Book
V of Executive Order No. 292, otherwise known as the Administrative Code of
1987.
SECTION 2.79.1. Application for Registration for Individuals Earning

Compensation Income (BIR Form No. 1902). — The application for
registration of employees shall be accomplished by both employer and employee
relating to the following information and other requirements:
(A) Employee. —
(1) Required Information. —
(a) Name/Taxpayer's Identification Number (TIN)/Residential Address of

Employee/Other information required as stated in BIR Form No. 1902;
(b) Civil Status of Employee whether single, married, legally separated,

widow or widower;
(c) Occupational Status of spouse of the employee. — If the employee is

legally married, the name and TIN, if any, of the spouse, and whether said spouse is
employed locally or abroad, unemployed, or engaged in trade or business;
(2) Required forms and attachments. —
The taxpayer shall file an application for registration (BIR Form 1902).
To establish identity and status, taxpayer is required to attach the following
documents, if applicable:
(a) Any identification issued by an authorized government body

(e.g., birth certificate, passport, driver's license) that shows the
name, address, and birthdate of the applicant; In case of alien
employee, Passport and Working Permit or photocopy of duly
received Application for Alien Employment Permit (AEP) by
the Department of Labor and Employment (DOLE);
(b) Copy of Marriage contract, if married;
(c) Other documentary evidence to support employees'

identification, where the above documents are not available.
(3) Concurrent multiple employments. — An employee who is employed

concurrently by two or more employers within the same period of time during the
taxable year shall file the Application for Registration (BIR Form No. 1902) with his
main employer (employer to whom the said employee's service is rendered for most
of the time during the taxable year) and shall furnish a copy of the duly received
application with the secondary employers (2nd, 3rd, etc. employers). The employed
husband and wife shall each file a separate application with their respective
employers;
(4) Successive multiple employment — An employee who transferred to

another employer during the taxable year, shall furnish the concerned new employer
a copy of the Certificate of Compensation Payment/Tax Withheld (BIR Form No.
2316) for compensation payment with or without withholding tax during the
taxable/calendar year issued by previous employer/s.
(B) Employer. — The employer with whom the Application for Registration
(BIR Form No. 1902) is filed, must indicate the date of receipt thereon and
accomplish Part IV of the said Application pertaining to Employer's Information
such as TIN, Employer's Registered Name, and other relevant information.
(C) Procedures for the filing of the Application for Registration (BIR Form
No. 1902) and/or Application for Registration Information Update (BIR Form No.
1905). —
(1) All employers shall require their concerned employees to accomplish in

triplicate the Application for Registration BIR Form 1902 (if the employee does not
have existing TIN) or Application for Update of Registration BIR Form 1905 (if
the employee has existing TIN and/or registered outside the RDO of the
employer or if update of the employer's information), distributed as follows:
(1.1) Original copy — RDO;
(1.2) Duplicate — employer; and
(1.3) Triplicate — employee.
The said forms shall be accomplished and submitted based on the

following manner:
(a) New employee/s shall accomplish the Application for Registration

for Individuals Earning Compensation Income (BIR Form No.
1902) and submit the same to the employer. The employer shall
file the fully accomplished registration form of employees
registering for the first time to the BIR within ten (10) days
from the date of employment or secure the TIN of new
employees using the eRegistration System;
(b) In case of changes in the information data in the Application for

Registration (BIR Form No. 1902) previously submitted by the
employee, such as changes in employment, multiple employment
status and amount of compensation income, an Application for
Registration Information Update (BIR Form No. 1905)
reflecting the changes, together with the required documentary
evidence of changes, must be submitted to the employer within ten
(10) days after such change. The employer shall then make the
necessary adjustments on the withholding tax of the employee
based on the new information;
(2) The employer shall transmit all copies of the completely filled-out
Application for Registration Information Update (BIR Form No. 1905) to the
concerned office of the LTS/RR/RDO where the employer is registered, on or
before the last day of the month of receipt from the employee. The RDO or his
duly authorized representative, where the employer is registered, shall receive and
stamp the three copies. The triplicate copy duly stamped received by the BIR shall be
given to the employee.
Registration and information updates of employees receiving purely

compensation income shall follow the existing policies and procedures thereon.
SECTION 2.79.2. Failure to file Application for Registration (BIR Form No.
1902) — Where an employee, in violation of these regulations either fails or
refuses to file an Application for Registration (BIR Form No. 1902) together with the
required attachments, the employer shall withhold the taxes prescribed under the
revised withholding tax table (Annex "D" or "E", whichever is applicable)
SECTION 2.79.3. Withholding on the Basis of Average Compensation.

— The employer may withhold the tax under the NIRC, as amended, on the basis of
the employee's average estimated compensation, with the necessary adjustments, for
any month/quarter/year.
SECTION 2.79.4. Husband and Wife. —Where both husband and wife
are each recipients of compensation either from the same or different employers,
taxes shall be withheld separately in accordance with the applicable revised
withholding tax table (Annex "D" or "E").
SECTION 2.79.5. Non-Resident Aliens. — Compensation for services

rendered in the Philippines paid to non-resident aliens engaged in trade or business
shall be subject to withholding under these Regulations.
SECTION 2.79.6. Year-End Adjustment. — On or before the end of the

calendar year, and prior to the payment of the compensation for the last payroll
period, the employer shall determine the sum of the taxable regular and
supplementary compensation paid to each employee for the entire year, including the
last compensation to be paid and compute for the amount of income tax on the
annualized gross compensation income; Provided however, that the taxable fringe
benefits received by employees except those given to the rank and file shall be subject
to a final fringe benefits tax.
SECTION 2.80. Liability for Tax. —
(A) Employer. —
(1) In general, the employer shall be responsible for the withholding and
remittance of the correct amount of tax required by deducting and withholding from
the compensation income of his employees. If the employer fails to withhold and
remit the correct amount of tax, such tax shall be collected from the employer
together with the penalties or additions to the tax otherwise applicable.
(2) The employer who is required to collect, account for and remit any tax
imposed by the NIRC, as amended, who willfully fails to collect such tax, or account
for and remit such tax or willfully assist in any manner to evade any payment thereof,
shall in addition to other penalties, provided for in the Code, as amended, be liable,
upon conviction, to a penalty equal to the amount of the tax not collected nor
accounted for or remitted. Cdpr
(3) Any employer/withholding agent who fails, or refuses to refund excess

withholding tax not later than January 25 of the succeeding year shall, in addition to
any penalties provided in Title X of the Code, as amended, be liable to a
penalty equal to the total amount of refund which was not refunded to the employee
resulting from any excess of the amount withheld over the tax actually due on their
return.
(B) Employee. — Where an employee fails or refuses to file the

Application of Registration or Certificate of Update of Exemption and of
Employer's and Employee's Information (BIR Form No. 2305) together with the
attachments or willfully supplies false or inaccurate information thereunder after due
written notice by the employer, the tax otherwise 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, where the employee, after
due written notice from the employer, willfully fails or refuses to file the Application
for Registration or the Certificate of Update of Exemption and of Employer's
and Employee's Information, whichever is applicable, or willfully supplies false
and inaccurate information, the excess taxes withheld by the employer shall not be
refunded to the employee but shall be forfeited in favor of the government.
(C) Additions to Tax. —
(1) There shall be imposed, in addition to the tax required to be paid, a

penalty equivalent to twenty five percent (25%) of the amount due, in the following
cases:
(a) Failure to file any return and pay the tax due thereon as required
under the provisions of the Code or these regulations on the date
prescribed; or
(b) Unless otherwise authorized by the Commissioner, filing a return

with an internal revenue officer other than those with whom the
return is required to be files; or
(c) Failure to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment; or
(d) Failure to pay the full or part of the amount of tax shown on any
return required to be filed under the provisions of the Code or
these regulations, or the full amount of tax due for which no return
is required to be filed, or before the date prescribed for its
payment; or
(e) In case of willful neglect to file the return within the period
prescribed by the Code or regulations, or in case a false or
fraudulent return is willfully made, the penalty to be imposed shall
be fifty percent (50%) of the deficiency tax, in case any payment
has been made on the basis of such return before the discovery of
the falsity or fraud.
(f) The penalties imposed hereunder shall apply in the case of a

deficiency tax assessment which has become final and executory
but which is not paid within the time prescribed for payment. The
interest shall be imposed on the total amount due, inclusive of the
deficiency increments.
(2) Interest — There shall be assessed and collected on any unpaid

amount of tax, interest at the rate of double the legal interest rate for loans or
forbearance of any money in the absence of an express stipulation set by the
Bangko Sentral ng Pilipinas from the date prescribed for payment until the
amount is fully paid. Provided, that in no case shall the deficiency and the
delinquency interest prescribed under Subsections (B) and (C) hereof, be
imposed simultaneously.
(3) Deficiency Interest — Any deficiency in the tax due, as the term is
defined in this Code, shall be subject to the interest prescribed in Subsection (A)
hereof, which interest shall be assessed and collected from the date prescribed for its
payment until the full payment thereof, or upon issuance of a notice and demand
by the Commissioner of Internal Revenue, whichever comes earlier. Cdpr
If the withholding agent is the government or any of its agencies, political
subdivisions, or instrumentalities or a government-owned or controlled corporation,
the employee thereof responsible for the withholding and remittance of tax shall be
personally liable for the surcharge and interest imposed herein.
(D) Failure to File Certain Information Returns (Sec. 250 of the Code). — In
the case of each failure to file an information return, statement or list, or keep any
record, or supply any information required by this Code or by the Commissioner on
the date prescribed therefor, unless it is shown that such failure is due to reasonable
cause and not to willful neglect, there shall, upon notice and demand by the
Commissioner, be paid by the person failing to file, keep or supply the same, one
thousand pesos (P1,000) for each such failure: Provided, however, That the aggregate
amount to be imposed for all such failures during a calendar year shall not exceed
twenty-five thousand pesos (P25,000).
(E) Specific Penalties. — Notwithstanding the penalties hereunder provided,

the following violations may be extrajudicially settled through compromise pursuant
to Sec. 204 of the Code.
(1) Failure to file return, supply correct and accurate information, pay tax,
withhold and remit tax and refund excess tax withheld on compensation (Sec. 255 of
the Code). — Any person required under the Code, as amended, or by regulations to
pay any tax, make a return, keep any record/s, or supply correct and accurate
information, who willfully fails to pay such tax, make such return, keep any record/s,
or supply correct and accurate information, or withhold or remit taxes withheld, or
refund excess taxes withheld on compensation, at the time or times required by law,
shall in addition to the other penalties provided by law, upon conviction thereof, be
fined not less than ten thousand pesos (P10,000) and imprisonment of not less than
one (1) year but not more than the (10) years.
(2) Declarations under penalties of perjury (Sec. 267 of the Code). — Any
declaration, return and other statements required under the Code, as amended, shall,
in lieu of an oath, contain a written statement that they are made under the penalties
of perjury. Any person who willfully files a declaration, return or statement
containing information which is not true and correct as to every material matter shall,
upon conviction, be subject to the penalties prescribed for perjury under the Revised
Penal Code.
(3) Violation of withholding tax provision by a government officer (Sec. 272

of the Code). — Every officer or employee of the government of the Republic
of the Philippines or any of its agencies and instrumentalities, its political
subdivisions, as well as government-owned or controlled corporation including the
Central Bank who, under the provisions of the Code, as amended, or regulations
promulgated thereunder, is charged with the duty to deduct and withhold any internal
revenue tax and to remit the same in accordance with the provisions of the Code as
amended, and other laws shall be guilty of any offense herein below specified and
upon conviction of each act or omission, be fined in a sum not less than five thousand
pesos (P5,000) but not more than fifty thousand pesos (P50,000) or imprisoned for a
term of not less than six months and one day but not more than two years, or both:
(a) Those who fail or cause the failure to deduct and withhold any
internal revenue tax under any of the withholding tax laws and
implementing regulations;
(b) Those who fail or cause the failure to remit taxes deducted and
withheld within the time prescribed by law, and implementing
regulations; and
(c) Those who fail or cause the failure to file a return or statement
within the time prescribed, or render or furnish a false or
fraudulent return or statement required under the withholding tax
laws and regulations.
(4) Violation of other provisions of the Code or regulations in general (Sec.

275 of the Code). — A person who violates any provision of the Code, as amended,
or any regulation, for which no specific penalty is provided by law shall, upon
conviction for its act or omission, be fined in a sum of not more than one thousand
pesos or imprisoned for a term of not more than six months, or both.
The specific schedule of penalties shall be provided in a separate regulation.
SECTION 2.81. Filing of Return and Payment of Income Tax Withheld on

Compensation (Form No. 1601). — Every person required to deduct and
withhold the tax on compensation, including large taxpayers as determined by the
Commissioner, shall make a return and pay such tax on or before the 10th day of the
month following the month in which withholding was made to any authorized agent
bank within the Revenue District Office (RDO) or in places where there are no agent
banks, to the Revenue District Officer of the City or Municipality where the
withholding agent/employer's legal residence or place of business or office is located;
provided, however, that taxes withheld from the last compensation (December) for
the calendar year shall be paid not later than January 15 of the succeeding year;
Provided, however, that with respect to taxpayers, whether large or non-large,
who availed of the EFPS, the deadline for electronically filing the aforesaid
withholding tax return and paying the tax due thereon via the EFPS shall be five
(5) days later than the deadlines set above.
If the person required to withhold and pay the tax is a corporation, the return
shall be made in the name of the corporation and shall be signed and verified by the
president, vice-president, or authorized officers.
With respect to any tax required to be withheld by a fiduciary, the returns shall
be made in the name of the individual, estate, or trust for which such fiduciary acts,
and shall be signed and verified by such fiduciary. In the case of two or more joint
fiduciaries the return shall be signed and verified by one of such fiduciaries.
SECTION 2.82. Return and Payment in Case Where the Government is the
Employer. — If the Government of the Philippines, its political subdivision or
any agency or instrumentality, as well as government-owned or controlled
corporation is the employer, the returns of the tax may be made by the officer or
employee having control of payment of compensation or other officer or employee
appropriately designated for the purpose.
SECTION 2.83. Statement and Returns.
SECTION 2.83.1. Employees Withholding Statements (BIR Form No. 2316).

— In general, every employer or other person who is required to deduct and
withhold the tax on compensation, including fringe benefits given to rank and file
employees, shall furnish every employee from whom taxes were withheld a
Certificate of Compensation Payment and Tax Withheld (BIR Form No. 2316) on or
before January 31 of the succeeding calendar year, or if employment is terminated
before the close of such calendar year, on the day on which the last payment of
compensation is made. The said BIR Form No. 2316 is also required to be issued
by every employer to employees classified as MWEs and to other employees
whose compensation were not subjected to withholding tax.
The employer shall prepare BIR Form No. 2316 in triplicate, which shall
be distributed as follows:
(1) Original — Employee's copy;
(2) Duplicate — BIR's copy; and
(3) Triplicate — Employer's copy which shall be retained for a
period of ten (10) years.
The Certificate shall indicate the following information:
a. Name and address of the employee;
b. Employee's Taxpayer Identification Number (TIN);
c. Name and Address of the Employer;
d. Employer's TIN;
e. The sum of compensation paid, including the non-taxable

benefits;
f. The amount of statutory minimum wage received if employee

is MWE;
g. Overtime pay, holiday pay, night shift differential pay, and

hazard pay received if employee is MWE;
h. The amount of tax due, if any; and
i. The amount of tax withheld, if any.
The Certificate must be signed by both the employer/employer's

authorized officer and the employee. It shall contain a written declaration that it
is made under the penalties of perjury. If the employer is the Government of the
Philippines, its political subdivision, agency or instrumentality or
government-owned or controlled corporation, the statement shall be signed by
the duly designated officer or employee.
Employees qualified for the substituted filing of his/her Income Tax

Return (ITR) as indicated under Sec. 2.83.4 of RR No. 2-98, as amended, shall
immediately affix their signatures in the Certificate of Compensation Payment
and Tax Withheld to signify their intention to avail of the substituted filing of
ITR, and return to the employer the duly signed Certificates for the latter's
signature. The employer shall give back to the employee qualified for substituted
filing of ITR the original copy while the duplicate copy shall be submitted by the
employer to the concerned BIR office not later than February 28 of the
succeeding year, with accompanying Certified List of Employees Qualified for
Substituted Filing of ITR (Annex "F"), reflecting the amount of income
payment, the tax due and tax withheld. This list shall be stamped "Received" by
the concerned BIR office, which shall be tantamount to the substituted filing of
ITR by the qualified employees. In the event that the employee will need his/her
Certificate BIR Form No. 2316) stamped "Received," he/she shall request the
concerned BIR office to have the Certificate stamped "Received" accompanied
with the submission of the employer's certification that he/she was included in
the list submitted by such employer to the BIR.
For employees not qualified for substituted filing of Income Tax Return,
two (original and duplicate) copies of the subject certificate shall be given to the
employee to serve as proof of compensation received and tax credit, and the
other copy shall be retained by the employer. This shall form part of the
employee's Income Tax Return to be filed on or before April 15 of the following
year.
Failure of the employer to furnish the employee of the Certificate of

Compensation and Tax Withheld shall be a ground for the mandatory audit of
payor's all internal revenue tax liabilities upon verified complaint.
In case of successive employments during the taxable year, an extra copy of

BIR Form No. 2316, duly certified by the previous employer, shall be furnished
by the employee to the new employer.
Any employer/withholding agent, including the government or any of its

political subdivisions and government owned and controlled corporations,
who/which fails to comply with the above filing/submission of BIR Form No.
2316 within the time required by these Regulations, may be held liable under
Section 250 of the Tax Code, as amended, for each failure.
The imposition of any of the penalties under the Tax Code, as amended,
and the compromise of the criminal penalty on such violations shall not in any
manner relieve the violating taxpayer from the obligation to submit the required
documents.
Any employer/withholding agent, including the government or any of its

political subdivisions and government owned and controlled corporations,
who/which fails to comply with the above filing/submission of BIR Form No.
2316 within the time required by these Regulations for two consecutive years
may be dealt with in accordance with Section 255 of the Tax Code, as amended.
SECTION 2.83.2. Annual Information Return of Income Taxes Withheld on

Compensation and Final Withholding Taxes (BIR Form No. 1604-CF). —
Every employer or other persons required to deduct and withhold the tax is required
to file with the Large Taxpayers Assistance Division (LTAD)/Large Taxpayers
District Office (LTDO)/RDO where the payor/employer is registered as
Withholding Agent on or before January 31 of the following year an Annual
Information Return of Income Taxes Withheld on Compensation and Final
Withholding Taxes (BIR Form No. 1604-CF), to be submitted with the alphabetical
list of employees/payees.
(A) The Annual Information Return of Income Taxes Withheld on

Compensation must show among others, the following:
(1) Withholding Agent's registered name, address and Taxpayer's

Identification Number (TIN);
(B) The alphabetical list of employees must show the following:
(1) Name and TIN of employees;
(2) Gross compensation paid by present and previous employers for

the calendar year;
(3) (a) Taxable 13th month pay/other benefits for the rank and file
employees
(b) Taxable fringe benefits for managerial employees;
(4) Non-taxable 13th month pay/other benefits (Present employer)
(5) Non-taxable statutory minimum wage;
(6) Non-taxable holiday pay, overtime pay, night shift differential

pay and hazard pay (minimum wage earners only);
(7) (a) For 2008, Amount of Exemptions (January 1 to July 5, 2008)

and Amount of Exemptions (July 6 to December 31, 2008);
(b) For 2009 and thereafter, Amount of Exemptions;
(8) Amount of premium payments on health and/or hospitalization

insurance not exceeding P2,400.00, if any;
(9) Tax required to be withheld computed in accordance with Sec. 24

(A) of the Code;
(10) Tax withheld by all present employers for the calendar year; and
(11) Adjustment, if any.
(C) The alphabetical list of employees shall be prepared indicating, among

others, separate listings of the following:
(1) Employees Separated/Terminated before December 31 of the

taxable year (indicate date of separation/termination);
(2) Employees whose compensation income are exempt from

withholding tax BUT subject to income tax;
(3) Employees whose total compensation income are exempt from

withholding tax and not subject to income tax (indicate if
MWE);
(4) Employees as of December 31 of the taxable year with no

previous employment within the year;
(5) Employees as of December 31 of the taxable year with previous

employment within the year;
(6) Employees who received Fringe Benefits subjected to Fringe

Benefit Tax;
(7) Alien employees subject to withholding tax.
Employers with centralized accounting system, or those mandated to

consolidate remittances (e.g. large taxpayers), shall prepare alphalists on a
regional basis or per branch office, due to the identification of SMW per region
where the employee is assigned, which shall be submitted to the BIR where the
head office is located.
In cases where no information was provided by a previous employer, such fact

shall be stated in BIR Form No. 1604-CF and the present employer shall not be
liable to any penalties.
SECTION 2.83.3. Requirement for List of Payees. — All withholding

agents shall, regardless of the number of employees and payees, whether the
employees/payees are exempt or not, submit an alphabetical list of employees
and list of payees on income payments subject to creditable and final
withholding taxes which are required to be attached as integral part of the
Annual Information Returns (BIR Form No. 1604CF/1604E) and Monthly
Remittance Returns (BIR Form No. 1601C, etc.), under the following modes:
(1) As attachment in the Electronic Filing and Payment System (eFPS);
(2) Through Electronic Submission using the BIR's website address at

esubmission@bir.gov.ph; and
(3) Through Electronic Mail (email) at dedicated BIR addresses using

the prescribed CSV data file format, the details of which shall be issued in a
separate revenue issuance.
In cases where any withholding agent does not have its own internet
facility or unavailability of commercial establishments with internet connection
within the location of the withholding agent, the alphalist prescribed herein may
be electronically mailed (e-mail) thru the e-lounge facility of the nearest revenue
district office or revenue region of the BIR.
The submission of the herein prescribed alphalist where the income

payments and taxes withheld are lumped into one single amount (e.g., "Various
employees", "Various payees", "PCD nominees", "Others", etc.) shall not be
allowed. The submission thereof, including any alphalist that that does not
conform with the prescribed format thereby resulting to the unsuccessful
uploading into the BIR system shall be deemed not as received and shall not
qualify as a deductible expense for income tax purposes.
Accordingly, the manual submission of the alphabetical lists containing

less than ten (10) employees/payees by withholding agents under Annual
Information Returns BIR Form No. 1604CF and BIR No. 1604E shall be
immediately discontinued beginning January 31, 2014 and March 1, 2014,
respectively, and every year thereafter.
SECTION 2.83.4. Substituted Filing of Income Tax Returns by Employees

Receiving Purely Compensation Income. — 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
Annual Income Tax Return for Individuals Earning Purely Compensation
Income (BIR Form No. 1700). In lieu of BIR Form No. 1700, the Certified List of
Employees Qualified for Substituted Filing of ITR with information regarding
the name of compensation earner, TIN, compensation paid, tax due and tax
withheld, filed by the employer with the concerned BIR office and stamped
"Received" by the latter shall be tantamount to the substituted filing of ITRs by
concerned employees.
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, non-profession-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), 2.83.4(C) and 2.83.4(D) 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, non-professional-related income.
In case of married individuals who are still required to file returns under
existing provisions of the law, i.e., in those instances not covered by the substituted
filing of returns, only one return for the taxable year shall be filed by either spouse to
cover the income of the spouses, which return shall be signed by the husband and
wife unless it is physically impossible to do so, in which case signature of one of the
spouses would suffice.
Employees not qualified for substituted filing but are required to file the
Income Tax Return shall file the same not later than April 15 of the year immediately
following the taxable year. Provided, that employees with previous/successive
employer/s within the taxable year shall furnish their new employer with BIR Form
No. 2316 issued by the previous employer/s.
SECTION 2.83.5. Registration as Withholding Agent. — Any person

who makes payment or expects to make payment of compensation in the amount
exceeding the statutory minimum wage, to any single employee shall register by
filing in duplicate, with the Revenue District Office (RDO) of the city or municipality
where his legal residence or place of business is located, an Application for
Registration as a withholding agent using the form prescribed by the Bureau not later
than ten (10) days after becoming an employer.
SECTION 2.83.6. Applicability of Constructive Receipt of Compensation.

— The withholding tax on compensation shall apply to compensation actually
or constructively paid. Compensation is constructively paid within the meaning of
these Regulations when it is credited to the account of or set apart for an employee so
that it may be drawn upon by him at any time although not then actually reduced to
possession. To constitute payment in such a case, the compensation must be credited
or set apart for the employee without any substantial limitation or restriction as to
time or manner of payment or condition upon which payment is to be made, and must
be made available to him so that it may be drawn upon at any time, and its payment
brought with his control and disposition. A book entry, if made, should indicate an
absolute transfer from one account to another. If the income is not credited, but it is
set apart, such income must be unqualifiedly subject to the demand of the taxpayer.
Where a corporation contingently credits its employees with a bonus stock, which is
not available to such employees until some future date, the mere crediting on the
books of the corporation does not constitute payment. LexLib
SECTION 2.83.7. Extension of Time for Furnishing Statements to Employee.

— An extension of time, not exceeding thirty (30) days, within which to
furnish the Certificate of Income Tax Withheld on Compensation (Form No. 2316)
required by Sec. 2.83 of these Regulations upon termination of employment is hereby
granted to any employer with respect to any employee whose employment is
terminated during the calendar year. In the case of intermittent or interrupted
employment where there is a reasonable expectation on the part of both employer and
employee or further employment, there is no requirement that an employee's
withholding statement be immediately furnished the employee; but when such
expectation cease to exist, the statement must be furnished within thirty (30) days
from the date of termination of employment. The extension mentioned under this
Section refers to extension of time for furnishing the Certificate of Income Tax
Withheld on Compensation (Form No. 2316) upon termination of employment.
SECTION 4.114. Withholding of Value-Added Tax. —
In general, value-added tax due on the sale of goods and services are not
subject to withholding since the tax is not determinable at the time of sale. However,
gross payments to non-residents by both government and private entities for
services rendered in the Philippines shall be subject to final withholding tax at
the rate of 10% to be filed and paid using BIR Form No. 1600 — Monthly
Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld.
Moreover, sale of goods and services subject to VAT to the government

shall be subject to withholding pursuant to Sec. 114(C) of the National Internal
Revenue Code of 1997.
(A) Rates and basis of value-added tax to be withheld. — The gross payments
made by the government to sellers of goods and services shall be subject to
withholding tax at the rates herein prescribed:
(1) In general, payments by the government or any of its political

subdivisions, instrumentalities or agencies including
government-owned or controlled corporations (GOCCs) on
account of its purchase of goods from sellers and services rendered
by contractors/service providers who are subject to the
value-added tax —
On gross selling price for the purchase of goods (creditable)

3%
On gross payment for services rendered (creditable)
6%
(2) Payments made to government public works contractors

(creditable)
8.5%
(3) Payments for services rendered in the Phils. by non-residents

—
For lease or use of property or property rights

owned by non-residents in the Phils. (final)
10%
Services rendered to local insurance companies,
with respect to reinsurance premiums payable
to non-resident insurance or reinsurance
companies (final)
10%
Other services rendered in the Phil.

by non-residents (final)
10%
(B) Persons required to deduct and withhold. — All local government

units, represented by the Provincial Treasurer in the provinces, the City Treasurer in
the cities, the Municipal Treasurer in the municipalities, and Barangay Treasurer in
the barangays, Treasurers of GOCCs and the Chief Accountants or any person
holding similar position and performing similar function in government offices and
GOCCs, as withholding agents, shall deduct and withhold the value-added tax before
making any payment to the seller of goods and services.
Where the government as herein defined has regional offices, branches or

units, the withholding and remittance of the VAT withheld may be done on a
decentralized basis. As such the treasurer or the chief accountant or any person
holding similar function in said regional office, branch or unit shall deduct and
withhold the VAT before making any payment to the seller of goods and services.
Decentralized remittance, however, is not applicable if the taxpayer-withholding
agent is classified as large taxpayer by the Commissioner of Internal Revenue.
Private entities are likewise considered as withholding agents on gross

payments made to non-residents, applying the final withholding tax rate of ten
(10%) percent.
(C) Returns and payment of taxes withheld. — The withholding agents

shall accomplish the Monthly Remittance Return of Value Added tax and Other
Percentage Taxes Withheld (BIR Form No. 1600) in triplicate copies with Monthly
Alphalist of Payees (MAP), the tax base and the amount withheld paid upon filing
the return with the authorized agent banks under the jurisdiction of the Revenue
District Office (RDO)/Large Taxpayers District Office (LTDO) where the
withholding agent is required to register and file the return. In places where there is
no authorized agent bank, the return shall be filed directly with the Revenue
Collection Officer or the duly authorized Municipal/City treasurer of the Revenue
District Office where the withholding agent is required to register or file the return,
except in cases where the Commissioner otherwise permits.
(D) Certificate of Value-Added Tax Withheld At Source. — Every

government agent, whether a large or non-large taxpayer, shall furnish each seller of
goods and services from whom value-added taxes (VAT) have been deducted and
withheld, the Certificate of Creditable Tax Withheld at Source (BIR Form No. 2307)
to be accomplished in quadruplicate, the first three copies of which shall be given to
the seller/payee not later than the 10th day of the following month. The rule stated
herein shall also apply to private payors/persons in control of the payment, whether
large or non large taxpayers, for: a) the lease or use of properties or property rights
owned by non-residents; b) services rendered to local insurance companies, whether
large or non-large taxpayers, with respect to reinsurance premiums payable to
non-resident insurance or reinsurance companies; and c) services rendered in the
Philippines by non-residents; but the certificate or statement to be issued in this case
is the Certificate of Final Tax Withheld at Source (BIR Form No. 2306) which should
be issued upon request of the payee. Provided, however, that for income
(interest/discount/trading gain) earned by financial institutions (FI) on Treasury
Bills/Bonds, the Bureau of Treasury (BTR) may be allowed to issue one
consolidated Certificate of Value-Added Tax Withheld at Source (BIR Form No.
2307) covering the total income payment and the corresponding value-added tax
withheld during the month. The Certificate of Value-Added Tax Withheld at
Source (BIR Form No. 2307) shall have as its attachment a summary list
reflecting the following: (1) Name of the financial institution; (2) TIN (Taxpayer
Identification Number; (3) Period covered; (4) Amount of Income
(interest/discount/trading gain earned on Treasury Bills/Bonds); and (5) VAT
Remitted to the account of the Bureau of Internal Revenue. Such Certificate of
Creditable Tax Withheld at Source (BIR Form No. 2307) and Attachment shall
bear the signature of the Treasurer of the Philippines or his duly authorized
representative and shall be submitted directly to the Bureau of Internal Revenue
(BIR), Attention: ISOS DC Head. Provided, further, that the Revenue District
Officer having jurisdiction over the principal place of business of the Bureau of
Treasury shall be responsible for the issuance of individual
certificates/certification to the financial institutions reflecting exactly on a per
FI/payee basis, the information/data in the Certificate of Creditable Tax
Withheld at Source (BIR Form No. 2307) and the Attachment issued by the
BTR. Said certification is required to be attached to the VAT return in lieu of
BIR Form No. 2307 as proof of the creditable value-added tax withheld claimed
as deduction thereof.
(E) Liability of designated officers. —

(1) Additions to the tax. — The designated Treasurers, Chief Accountants
and other persons holding similar positions, who have the duty to withhold and remit
the value added tax in their respective offices shall be personally liable for the
additions to the tax prescribed in Sec. 247 of the Code.
(2) Punishable acts or omissions. — Every officer or employee of the

government of the Republic to the Philippines or any of its agencies and
instrumentalities, its political subdivisions, as well as government owned or
controlled corporations charged with the duty to deduct and withhold any internal
revenue tax and to remit the same in accordance with these regulations shall, upon
conviction for each act or omission herein-below specified, be fined in a sum of not
less than five thousand pesos (P5,000.00) but not more than fifty thousand pesos
(P50,000.00) or imprisoned for a term of not less than six months and one day but not
more than two years, or both.
(a) Fails or causes the failure to deduct and withhold any internal
revenue tax covered by these regulations;
(b) Fails or causes the failure to remit the taxes deducted and withheld
within the time prescribed therein;
(c) Fails or causes the failure to file the return or issue certificate
required.
SECTION 5.116. Withholding of Percentage Tax. —
Bureaus, offices and instrumentalities of the government, including

government-owned or controlled corporations as well as their subsidiaries, provinces,
cities and municipalities making any money payment to private individuals,
corporations, partnerships and/or associations are required to deduct and withhold the
percentage taxes due from the payees on account of such money payments.
(A) Internal revenue taxes required to be withheld. — Percentage taxes on

gross money payments, to the following shall be subjected to withholding at the rates
herein prescribed:
(1) Persons exempt from value-added tax (VAT). — On gross

payments to persons who are exempt under Sec. 109 (z) of
the Code from payment of value-added tax and who is not a VAT
registered person except payment to cooperatives — Three percent
(3%) Cdpr
(2) Domestic carriers and keepers of garages. — On gross payments
to operators of cars for rent or hire driven by the lessee,
transportation contractors, including those who transports
passengers for hire, and other domestic carriers by land, air or
water, for transport of passengers, except owner of bancas and
owners of animal-drawn two wheeled vehicle, and keepers of
garages — Three percent (3%)
(3) International carriers —
(a) On gross payments to international air carriers doing

business in the Philippines — Three percent (3%)
(b) On gross payments to international shipping carriers doing

business in the Philippines — Three percent (3%)
(4) Franchises —
(a) On gross payments to all franchises on radio and/or

television broadcasting companies whose annual gross
receipts of the preceding year does not exceed P10,000.00
— Three percent (3%)
(b) On gross payments to franchises on electric, gas and water

utilities — Two percent (2%)
(5) Banks and non-bank financial intermediaries —
(a) On interest, commissions and discounts paid or given to

banks and non-bank financial intermediaries arising out of
lending activities as well as financial leasing, on the basis of
the remaining maturities of the instrument —
Short-term maturity (not exceeding 2 years)

5%
Medium-term maturity (over 2 year but not exceeding 4
years)
3%
Long-term maturity
(i) over 4 years but not exceeding 7 years 1%

(ii) over 7 years 0%
(b) On dividends 0%
(c) On royalties, rentals of property, real or personal, profits

from exchange and all other gross income — Five percent
(5%)
(6) Finance companies —
(a) On interest, discounts and other items of gross income paid

to finance companies and other financial intermediaries not
performing quasi-banking functions — Five percent (5%)
(b) On interests, commissions and discounts paid from their

loan transactions from finance companies as well as
financial leasing based on the remaining maturities of the
instruments:
Short-term maturity (not exceeding 2 years)

5%
Medium-term maturity (over 2 years but not exceeding 4
years)
3%
Long-term maturity
(i) over 4 years but not exceeding 7 years 1%

(ii) over 7 years 0%
(7) Life insurance premiums — On the total premiums paid to persons

doing life insurance business of any sort in the Philippines — Five
percent (5%)
However the following shall not be included in the taxable receipts

and consequently not subject to withholding tax:
(a) Premiums refunded within six (6) months after payment on

account of rejection of risk or returned for other reasons to
the insured;
(b) reinsurance premiums where the tax has previously been

paid;
(c) premiums collected or received by any branch of a domestic
corporation, firm or association doing business outside the
Philippines on account of any life insurance of a
non-resident insured, if any tax on such premium is
imposed by a foreign country where the branch is
established;
(d) premiums collected or received on account of any

reinsurance, if the insured, in case of personal insurance
resides outside the Philippines, if any tax on such premiums
is imposed by a foreign country where the original
insurance has been issued or perfected; LLphil
(e) portion of the premiums collected or received by the

insurance companies on variable contracts in excess of the
amounts necessary to insure the lives of the variable
contract workers.
(8) Agents of foreign insurance companies —
(a) On premiums paid to every fire, marine, or miscellaneous

insurance agent legally authorized under the Insurance Code
to procure policies of insurance on risk located in the
Philippines for companies not authorized to transact
business in the Philippines except on reinsurance premium
— Ten percent (10%)
(b) On premium payments obtained directly with foreign

companies where the owner of the property does not make
use of the services of any agent, company or corporation
residing or doing business in the Philippines, in which case,
it shall be the duty of said owners to report to the Insurance
Commissioner and to the BIR Commissioner each case
where insurance has been so effected — Five percent (5%)
(9) Amusements — On gross payments to the proprietor, lessee, or

operator of cockpits, cabarets, night or day clubs, boxing
exhibitions, professional basketball games, jai-alai and racetracks
at the rates herein prescribed:
(a) cockpits — Eighteen percent (18%)
(b) Cabarets, night and day clubs — Eighteen percent (18%)
(c) Boxing exhibitions except those wherein World or Oriental

Championship in any division is at stake and at least one of
the contenders is a citizen of the Philippines and promoted
by a citizen/s of the Philippines or by a corporation or
association at least 60% of the capital of which is owned by
such citizens — Ten percent (10%)
(d) Professional basketball games as envisioned in Presidential

Decree No. 871 — Fifteen percent (15%)
(e) Jai-alai and racetracks irrespective of whether or not any

amount is charged for admission — Thirty percent (30%)
(10) Sale, barter or exchange of shares of stock listed and traded

through the local stock exchange. — On the gross selling
price or gross value in money derived on every sale, barter or other
disposition of shares of stock listed and traded through the local
stock exchange other than the sale by a dealer in securities —
One-half of one percent (1/2 of 1%)
(11) Shares of stock sold or exchanged through initial public offering.

— On the gross selling price or gross value in money
derived on every sale, barter, exchange or other disposition
through initial public offering of shares of stock in closely held
corporations in accordance with the proportion of such shares to
the total outstanding shares of stock after the listing in the local
stock exchange at the rates herein prescribed:
Not over 25% 4%

Over 25% but not exceeding 33 1/3% 2%
Over 33 1/3% 1%
(B) Returns and payments of taxes withheld. — No money payments

shall be made by any government office or agency unless the taxes due thereon shall
have been deducted and withheld.
Taxes deducted and withheld shall be covered by the Monthly Remittance

Return of VAT and Other Percentage Taxes Withheld (BIR Form No. 1600) in
triplicate copies with Monthly Alphalist of Payees (MAP), that likewise presents
the tax base and tax withheld to be filed and the tax to be paid to the authorized
agent bank under the jurisdiction of the Large Taxpayer Service including the Large
Taxpayer's District Office, in case of large taxpayer, or the Authorized Agent Bank
under the jurisdiction of the Revenue District Office were the withholding agent is
located, for non-large taxpayer. In places where there are no authorized agent bank,
the return shall be filed directly with the Revenue Collection Officer or the duly
authorized Treasurer of the City or Municipality where the withholding agent is
required to register except in cases where the Commissioner otherwise permits. The
required return shall be filed and payments made within ten (10) days following the
end of the month the withholding was made or the withholding tax has accrued.
(C) Certificate of percentage tax withheld at source. — Every

withholding agent shall furnish each proprietor, operator, common carrier, franchise
holder, bank and non-bank financial intermediaries, finance company, insurance
company or agent from whom taxes under these regulations had been deducted and
withheld the Certificate of Creditable Tax Withheld at Source (BIR Form 2307) to be
accomplished in triplicate, two copies to be given to the payee simultaneously with
the money payments not later than the fifth (5th) day of the following month. The
third copy of the certificate shall be the file copy of the withholding agent.
(D) Liability of designated officers —
(1) Additions to the tax — The designated Treasurers, Chief

Accountants and other persons holding similar positions, who have the duty to
withhold and remit the value added tax in their respective offices shall be personally
liable for the additions to the tax prescribed in Sec. 247 of the Code.
(2) Punishable acts or omissions — Every officer or employee of the

government of the Republic of the Philippines or any of its agencies and
instrumentalities, its political subdivisions, as well as government owned or
controlled corporations charged with the duty to deduct and withhold any internal
revenue tax and to remit the same in accordance with these regulations shall, upon
conviction for each act or omission herein-below specified, be fined in a sum of not
less than five thousand pesos (P5,000.00) but not more than fifty thousand pesos
(P50,000.00) or imprisoned for a term of not less than six months and one day but not
more than two years, or both.
(a) Fails or causes the failure to deduct and withhold any internal
revenue tax covered by these regulations;
(b) Fails or causes the failure to remit the taxes deducted and withheld
within the time prescribed therein;
(c) Fails or causes the failure to file the return or issue certificate
required.
SECTION 5.128. Withholding of Percentage Tax on Purchases of Goods

and/or Payments for Services Acquired in the Course of Trade or Business and
Rendered by Persons Subject to the 3% Percentage Tax Pursuant to Section 116 of
the Code. —
(A) Persons Required to Withhold the Percentage Tax. — In general, any

person, natural or juridical, with respect to his/its purchase of goods or
payments for purchase of services not arising from or incident to an
employer-employee relationship but made in the course of trade or business
(including exercise of profession or calling), from Non-VAT registered persons
subject to the 3% percentage tax under Section 116 of the Code [i.e., those whose
gross annual sales, for sale of goods, or gross annual receipts, for sale of services,
do not exceed five hundred fifty thousand pesos (P550,000.00), and who do not
opt to be registered as VAT taxpayers and, therefore, chose to be registered as
non-VAT persons pursuant to Section 236(I) of the Code], shall be subject to a
percentage tax withholding at source at the rate of three percent (3%), based on
the payee's gross sales/receipts, pursuant to Section 116, in relation to Sections
128 and 245(g), (i) and (j) of the Code if the taxpayer-payee opts to remit his
percentage tax through the withholding and remittance of the same by the
withholding agent-payor which option is manifested by filing the "Notice of
Availment of the Option to Pay the Tax through the Withholding Process"
(Annex E), copy-furnished the withholding agent-payor and the Revenue District
Offices of both the payor and payee.
The percentage tax withheld shall be remitted by the withholding agent

using BIR Form No. 1600 (Monthly Remittance Return of Value-added Tax and
Other Percentage Taxes Withheld) to the appropriate collection agents
[Accredited Agent Bank (AAB) or Revenue Collection Officer (RCO), whichever
is applicable] of the Bureau of Internal Revenue (BIR). Such return serves as the
withholding tax return of the payor-withholding agent and, likewise, serves as
the substituted percentage tax return of the payee if the said income
recipient-payee has only one payor from whom he generates his income and
provided, further, that a "Notice of Availment of the Substituted Filing of
Percentage Tax Return" (Annex "A") is filed with the Revenue District Office
(RDO) where the income-recipient is registered or required to register (Home
RDO). Such Notice of Availment shall state that the income recipient is a
non-VAT taxpayer, having not opted to be covered by the VAT system, with
actual annual gross sales (for sale of goods) or gross receipts (for sale of service),
or expected annual gross sales/receipts (for new taxpayer) of not more than
P550,000 from just one payor and that he is opting to file under the substituted
filing of percentage tax return. A copy of the said Notice shall be furnished the
lone payor of the income. Moreover, BIR Form No. 2306 (Certificate of Final
Tax Withheld at Source-March 2003 version), duly signed by both the payor and
the payee, shall be attached to the duly filed BIR Form No. 1600 and shall
constitute as the authority given by the payee to the payor to file and consider
the payor's duly filed BIR Form 1600 as the substituted percentage tax return of
the payee. The duly filed or stamped "Received" BIR Form 2306 shall serve the
same purpose as the percentage tax return (BIR Form 2551M) of the payee.
Accordingly, a taxpayer availing of the Substituted Filing of Percentage Tax
Return shall update his registration data with his Home RDO.
On the other hand, if the payee has more than one payor, the percentage
tax withheld and remitted by the payor under BIR Form No. 1600 shall be
treated as creditable tax by the payee when he files the monthly percentage tax
return under BIR Form No. 2551M. The claimed tax credit shall be evidenced by
BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source-March
2003 version) duly executed and signed by both the payor and the payee attesting
to the correctness of the figures reflected therein. Since the percentage tax has
already been withheld at source based on gross amount and remitted by the
payors under BIR Form No. 1600, the Percentage Tax Return (BIR Form No.
2551M) to be filed by the payee which will not be reflecting any amount payable,
shall just serve as a return consolidating all the transactions with all the payors
which have already been subjected to withholding tax and which return (BIR
Form No. 2551M) shall be filed directly with the appropriate BIR office without
the need of passing through an Accredited Agent Bank (AAB) or Revenue
Collection Officer (RCO). Nonetheless, in case the total amount of tax withheld
by the payors who are engaged in business is incorrect or the payee has
transactions with payors who are not engaged in business and therefore not
obliged to withhold, the percentage tax return (BIR Form No. 2551M) of the
payee which will be reflecting an amount payable shall be filed with the AAB or
the RCO, in the absence of an AAB, of the Revenue District Office that has
jurisdiction over the taxpayer-payee.
Provided, further that, if at any time of the year, the accumulated gross
sales or gross receipts exceed P550,000, the income recipient-payee shall change
its/his registration with the BIR from Non-VAT to VAT within one month from
the close of the month when the threshold amount was reached. Such payee shall
become VAT-registered taxpayer starting the first day of the month following
the month of his VAT registration. Accordingly, notification to the payors of
income shall be made with respect to such change in "taxpayer classification" of
the payee. Change in the tax type and rate of withholding shall correspondingly
be made by the income payor.
(B) Returns and Payments of Taxes Withheld. — Except in cases where

the Commissioner otherwise permits, taxes deducted and withheld pursuant to
this Section shall be remitted using the Monthly Remittance Return of VAT and
Other Percentage Taxes Withheld (BIR Form 1600) in triplicate which return to
be filed and the tax to be paid to the Authorized Agent Banks (AABs) under the
jurisdiction of the Large Taxpayer's Service including Large Taxpayer's District
Offices, in case of large taxpayer, or the AAB under the jurisdiction of the
Revenue District Office (RDO) where the withholding agent is located, in case of
non-large taxpayer. In places where there is no AAB, the return shall be filed
with and the tax paid directly to the Revenue Collection Officer (RCO) or the
duly authorized Treasurer of the City or Municipality where the withholding
agent is required to register. The required return shall be filed and payments
made within ten (10) days following the end of the month the withholding was
made or the withholding has accrued. If the withholding agent is enrolled in
Electronic Filing and Payment System (EFPS), the filing of returns and payment
of withholding taxes shall be in accordance with the rules and regulations
governing EFPS.
(C) Certificate of Percentage Taxes Withheld. — The payor-withholding

tax agent shall issue to the payee a "Certificate of Final Tax Withheld at Source"
(BIR Form No. 2306) for the 3% final percentage tax withheld, to be
accomplished in quadruplicate, two copies of which shall be given to the Payee
within ten (10) days following the end of the month the withholding was made,
one copy of the Certificate shall be the file copy of the withholding agent and the
last copy shall be attached to the filed BIR Form No. 1600. The Certificate (BIR
Form No. 2306) to be issued by the withholding agent shall be signed by both the
withholding agent and the payee attesting to the correctness and accuracy of the
information contained therein and likewise stating that it serves as the authority
given by the payee to the payor to file and consider the payor's duly filed BIR
Form 1600 as the substituted percentage tax return of the payee for a payee with
only one payor. BIR Form No. 2307 (Certificate of Creditable Tax Withheld at
Source) is the certificate that should be issued to the payee by the payor if the
payee has several other payors as signified by such payee. Such Certificate shall
be issued in quadruplicate, two copies to be issued to the payee for attachment to
the Percentage Tax Return (BIR Form No. 2551M) to be filed by the payee
consolidating all its/his taxable transactions for the month, one copy to be
attached by the payor to the filed BIR Form No. 1600 and one copy serves as the
file copy of the payor.
(D) Substituted Percentage Tax Return. — In the case of sale of goods or

services by persons subject to 3% percentage tax under Section 116 of the Code,
whose gross sales or receipts have already been subjected to the withholding of
the 3% percentage tax by the lone payor, the payee shall no longer be required
to file the monthly percentage tax return (BIR Form No. 2551M) with respect to
such receipts. The BIR Form No. 1600 duly filed by the payor serves as the
substituted return of the payee with lone payor provided that the BIR Form No.
2306 duly executed and signed by both the payor and the payee is attached to the
filed BIR Form No. 1600.
(E) Regular Percentage Tax Return. — Payees with several payors are
still required to file the regular percentage tax return reflecting therein the
consolidated total of all the taxable transactions for the taxable period and
applying as tax credit the taxes withheld by several payors evidenced by the duly
issued BIR Form No. 2307 which must be attached to the Percentage Tax Return
(BIR Form No. 2551M). If all the transactions reflected/consolidated in the
Percentage Tax Return (BIR Form No. 2551M) are with several payors who are
engaged in business and therefore have been subjected to the 3% withholding
tax, the Percentage Tax Return will no longer reflect any tax payable but will
just be a simple consolidation of all the taxable transactions for a given taxable
period which may be filed directly with the appropriate BIR office and thus need
not pass through any AAB or collecting RCO. Nonetheless, in case the total
amount of tax withheld by the payors who are engaged in business is incorrect or
the payee has transactions with payors who are not engaged in business and
therefore not obliged to withhold the tax, the percentage tax return (BIR Form
No. 2551M) of the payee which will be reflecting an amount payable shall be
filed with the AAB or the RCO, in the absence of an AAB, of the Revenue
District Office that has jurisdiction over the taxpayer-payee.
(F) Substituted Official Receipt. — For sellers of services whose gross

receipts have been subjected to the withholding of the 3% percentage tax, they
shall be exempted from the obligation of issuing duly registered non-VAT
receipts covering their receipt of payments for services sold. In lieu thereof, the
issued "Certificate of Final Tax Withheld at Source" (BIR Form No. 2306), for
payee with just one payor, or "Certificate of Creditable Tax Withheld at
Source" (BIR Form No. 2307), for payee with several payors, shall be constituted
and treated as the substituted official receipt, pursuant to the provisions of
Section 237 of the Code, the pertinent portion of which provides:
"SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. —

....
"The Commissioner may, in meritorious cases, exempt any person subject

to an internal revenue tax from compliance with the provisions of this
Section."
(G) The Option to Remit the Tax under the Withholding Tax System and
the Option to Avail of the Substituted Filing of the Percentage Tax Return. — The
option to remit the Percentage Tax under the withholding system once chosen
remains as the manner of remitting the tax unless said option is cancelled by the
payee (Annex F). Meanwhile, the option to file under the Substituted Filing of
the Percentage Tax Return allowed to a payee with just one payor in a given
taxable year shall continue to apply to subsequent taxable years until such time
that the taxpayer-payee files the "Notice of Cancellation of Availment of the
Substituted Filing of Return" (Annex D) not later than the 10th day of the month
following the close of taxpayer's taxable year which shall automatically revert
said taxpayer to the status of taxpayers filing the returns under the regular filing
procedures. If within the taxable year, an additional client or customer comes in,
the taxpayer-payee shall immediately file the 'Notice of Cancellation of
Availment of the Substituted Filing of Returns'.
SECTION 9.245. Withholding of VAT on Purchase of Goods and/or on

Payments for Services Acquired in the Course of Trade or Business and Rendered
by Persons Subject to VAT Pursuant to Sections 106 and 108 of the Code. —
(A) Persons Required to Withhold the Value-Added Tax. — In general, any

person, natural or juridical, with respect to his/its purchase of goods or
payments for purchase of services not arising from or incident to an
employer-employee relationship but made in the course of trade or business
(including exercise of profession or calling), from VAT registered persons
subject to value-added tax under Sections 106 and 108 of the Code, shall be
subject to VAT withholding at source at the rate of ten percent (10%), based on
the payee's gross sales/receipts, pursuant to Sections 106 and 108 in relation to
Section 245(g), (i) and (j) of the Code, provided that the payee has executed the
"Waiver of the Privilege to Claim Input Tax Credits" (Annex C) and opted to
remit the VAT through the withholding and remittance of the same by the
withholding agent-payor by likewise executing the "Notice of Availment of the
Option to Pay the Tax through the Withholding Process" (Annex E), which
waiver and notice are copy-furnished the payor-withholding agent and the RDOs
of both the payors and the payee.
The VAT withheld shall be remitted by the withholding agent using BIR
Form 1600 (Monthly Remittance Return of Value-added Tax and Other
Percentage Taxes Withheld) to the appropriate collection agents [Accredited
Agent Bank (AAB) or Revenue Collection Officer (RCO), whichever is
applicable] of the Bureau of Internal Revenue (BIR). Such return serves as the
withholding tax return of the payor-withholding agent and at the same time,
likewise, serves as the substituted VAT return of the payee if the said income
recipient-payee has only one payor from whom he generates his income and
provided, further, that a "Notice of Availment of the Substituted Filing of VAT
Return" (Annex "B") is filed with the RDO where the income-recipient is
registered or required to register (Home RDO). Such Notice of Availment shall
state that the income recipient is a VAT-registered taxpayer with gross sales (for
sale of goods) or gross receipts (for sale of service) for the whole year coming
from just one payor and that he is opting to file under the substituted filing of
VAT return having waived the privilege to claim VAT input credits. Copy of the
said Notice must be furnished the lone payor of the income and the RDOs of
both the payors and the payee. Upon receipt of the said Notice, the payor is
mandatorily required to withhold the 10% VAT on the income payment to the
payee and shall remit the same to the appropriate collection agents (AAB or
RCO, whichever is applicable) of the BIR. Moreover, BIR Form No. 2306
(Certificate of Final Tax Withheld at Source-March 2003 version) duly signed by
both the payor and the payee attesting to the accuracy of the figures stated
therein shall be attached to BIR Form No. 1600 filed with the BIR and shall
constitute as the authority given by the payee to the payor to file and consider
the payor's duly filed BIR Form 1600 as the substituted VAT return of the
payee. The duly filed and stamped "Received" BIR Form 2306 shall serve the
same purpose as the VAT return (BIR Form 2550Q) of the payee. Moreover,
taxpayer availing of the Substituted Filing of VAT Return shall update his
registration data with his Home RDO.
On the other hand, even if the payee has more than one payor but has
executed the "Waiver of the Privilege to Claim VAT Input Tax Credits" (Annex
C), and the "Notice of Availment of the Option to Pay the Tax through the
Withholding Process" (Annex E), copy-furnished the payors, the RDOs of both
the payors and the payee, said payors are mandatorily required to withhold the
10% VAT which value-added tax shall be withheld and remitted by the payor
using BIR Form No. 1600. Under this instance, the VAT withheld shall be
treated as creditable tax by the payee when he files the quarterly value-added
tax return under BIR Form No. 2550Q. The claimed tax credit shall be
evidenced by BIR Form No. 2307 (Certificate of Creditable Tax Withheld at
Source-March 2003 version) duly executed and signed by both the payor and the
payee attesting to the correctness of the figures reflected therein. Since the
value-added tax has already been withheld at source based on gross amount in
pursuance of the waiver of the right to claim input VAT (Annex C) executed by
the payee and remitted by the payors under BIR Form No. 1600, the
Value-added Tax Return (BIR Form No. 2550Q) to be filed by the payee which
will not be reflecting any amount payable shall just serve as a return
consolidating all the transactions with all the payors which have already been
subjected to withholding tax and which return shall be filed directly with the
appropriate BIR office without the need of passing through an Accredited Agent
Bank (AAB) or Revenue Collection Officer (RCO). Considering that under an
instance where all the payors who are engaged in business have already withheld
and remitted the 10% VAT as withholding agents of the payee the latter will no
longer be remitting any single amount of tax, the requirement of filing the
monthly VAT Declaration (BIR Form No. 2550M) by the payee shall be
dispensed with. Nonetheless, in case the total amount of tax withheld by the
payors who are engaged in business is incorrect or the payee has transactions
with payors who are not engaged in business and therefore not obliged to
withhold the tax, the monthly VAT Declaration (BIR Form No. 2550M) and the
quarterly VAT Return (BIR Form No. 2550Q) of the payee which will be
reflecting an amount payable shall still be filed with the AAB or the RCO, in the
absence of an AAB, of the Revenue District Office that has jurisdiction over the
taxpayer-payee.
(B) Returns and Payments of Taxes Withheld. — Except in cases where

the Commissioner otherwise permits, taxes deducted and withheld pursuant to
this Section shall be remitted using the Monthly Remittance Return of VAT and
Other Percentage Taxes Withheld (BIR Form 1600) in triplicate which return to
be filed and the tax to be paid to Authorized Agent Banks (AABs) under the
jurisdiction of the Large Taxpayer's Service including Large Taxpayer's District
Office, in case of large taxpayer, or the AAB under the jurisdiction of the
Revenue District Office (RDO) where the withholding agent is located, in case of
non-large taxpayer. In places where there is no AAB, the return shall be filed
with and the tax paid directly to the Revenue Collection Officer (RCO) or the
duly authorized Treasurer of the City or Municipality where the withholding
agent is required to register. The required return shall be filed and payments
made within ten (10) days following the end of the month the withholding was
made or the withholding has accrued. If the withholding agent is enrolled in
Electronic Filing and Payment System (EFPS), the filing of returns and payment
of withholding taxes shall be in accordance with the rules and regulations
governing EFPS.
(C) Certificate of VAT Withheld. — The payor-withholding agent shall

issue to the payee a "Certificate of Final Tax Withheld at Source" (BIR Form
No. 2306) for the 10% final VAT withheld, for payee with just one payor, or the
"Certificate of Creditable Tax Withheld at Source" (BIR Form No. 2307), for
payee with several payors, to be accomplished in quadruplicate, two copies of
which shall be given to the Payee within ten (10) days following the end of the
month the withholding was made, one copy shall be attached to BIR Form No.
1600 duly filed by the payor and the fourth copy of the Certificate shall be the
file copy of the withholding agent. The Certificate (BIR Form No. 2306) to be
issued by the withholding agent shall be signed by both the withholding agent
and the payee attesting to the correctness and accuracy of the information
contained therein and likewise stating that it serves as the authority given by the
payee to the payor to file and consider the payor's duly filed BIR Form 1600 as
the substituted VAT return of the payee for payee with only one payor. BIR
Form No. 2307 (Certificate of Creditable Tax Withheld at Source) is the
certificate that should be issued to the payee by the payor if payee has several
other payors as signified by such payee. Such Certificate shall be signed by both
the withholding agent and the payee attesting to the correctness and accuracy of
the information contained therein and shall be issued in quadruplicate, two
copies to be given to the payee for attachment to the Value-added Tax Return
(BIR Form No. 2550Q) to be filed by the payee consolidating all its/his taxable
transactions for the quarter, one copy to be attached to the filed BIR Form No.
1600 of the payor and one copy serves as the payor's file copy.
(D) Substituted VAT Return. — In the case of sale of goods or services by

persons subject to 10% VAT under Sections 106 and 108 of the Code, whose
gross sales or receipts have already been subjected to the 10% final VAT by the
lone payor, the payee shall no longer be required to file the monthly VAT
declarations (BIR Form No. 2550 M) and quarterly VAT returns (BIR Form No.
2550 Q) with respect to such receipts. The BIR Form No. 1600 duly filed by the
payor serves as the substituted return of the payee with lone payor provided that
the BIR Form No. 2306 duly executed and signed by both the payor and the
payee is attached to the filed BIR Form No. 1600.
(E) Regular Value-added Tax Return. — Payees with several payors are
still required to file the regular value-added tax return reflecting therein the
consolidated total of all the taxable transactions for the taxable period and
applying as tax credit the taxes withheld by several payors evidenced by the duly
issued BIR Form No. 2307 which must be attached to the Value-added Tax
Return (BIR Form No. 2550Q). If all the transactions are with several payors
who are engaged in business and therefore have been subjected to the 10%
withholding tax, the Value-added Tax Return will no longer reflect any tax
payable but will just be a simple consolidation of all the taxable transactions for
a given taxable period which may be filed directly with the appropriate BIR
office and thus need not pass through any AAB or collecting RCO.
In case of a payee whose all transactions are with payors who are engaged
in business and who have subjected the transactions to the withholding of the
10% VAT, the payee is no longer required to file the monthly VAT Declaration
(BIR Form No. 2550M).
Nonetheless, in case the total amount of tax withheld by the payors who
are engaged in business is incorrect or the payee has transactions with payors
who are not engaged in business and therefore not obliged to withhold the tax,
the Monthly Value-added Tax Declaration (BIR Form No. 2550M) and the
Quarterly Value-added Tax Return (BIR Form No. 2550Q) of the payee which
will be reflecting an amount payable shall be filed with the AAB or the RCO, in
the absence of an AAB, of the Revenue District Office that has jurisdiction over
the taxpayer-payee.
(F) Substituted Official Receipt. — For sellers of services whose gross

receipts have been subjected to 10% final VAT, they shall be exempted from the
obligation of issuing duly registered VAT official receipts covering their receipt
of payments for services sold. In lieu thereof, the issued "Certificate of Final Tax
Withheld at Source" (BIR Form No. 2306), for payee with one payor, or the
"Certificate of Creditable Tax Withheld at Source" (BIR Form No. 2307), for
payee with several payors, shall be constituted and treated as the substituted
official receipt, pursuant to the provisions of Section 237 of the Code, the
pertinent portion of which provides:
"SEC. 237.Issuance of Receipts or Sales or Commercial
Invoices. — . . . .
"The Commissioner may, in meritorious cases, exempt any

person subject to an internal revenue tax from compliance with the
provisions of this Section."
(G) The Option to Remit the Tax under the Withholding Tax System and
the Option to Avail of the Substituted Filing of the VAT Return. — The option to
remit the VAT under the withholding system once chosen remains as the manner
of remitting the tax unless said option is cancelled by the payee (Annex F).
Meanwhile, the option to file under the Substituted Filing of the VAT Return
allowed to payee with just one payor in a given taxable year shall continue to
apply to subsequent taxable years until such time that the taxpayer-payee files
the "Notice of Cancellation of Availment of the Substituted Filing of Return"
(Annex D) not later than the 10th day of the month following the close of
taxpayer's taxable year which shall automatically revert said taxpayer to the
status of taxpayers filing the returns under the regular filing procedures. If
within the taxable year, an additional client or customer comes in, the
taxpayer-payee shall immediately file the 'Notice of Cancellation of Availment of
the Substituted filing of Returns'.
REPEALING CLAUSE. — All existing rules and regulations or parts thereof

which are inconsistent with the provisions of these regulations are hereby revoked.
EFFECTIVITY. — These regulations shall take effect on compensation

income paid beginning January 1, 1998. No penalties shall apply until May 15, 1998
for non-compliance with the new features of the Code as implemented in these
regulations. cdasia
(SGD.) MILWIDA M. GUEVARA

Acting Secretary of Finance
Recommending Approval:
(SGD.) LIWAYWAY VINZONS-CHATO

Commissioner of Internal Revenue
Endnotes
1 (Popup - Popup)
* Formerly under letter (G)
2 (Popup - Popup)
* Formerly under letter (O)
3 (Popup - Popup)
* Formerly under letter (D)
4 (Popup - Popup)
* Formerly under letter (F)
5 (Popup - Popup)
* Formerly Step 6.

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April 17, 1998

REVENUE REGULATIONS NO. 02-98

SUBJECT : Implementing Republic Act No. 8424, "An Act Amending

TO : All Internal Revenue Officers and Others Concerned

Pursuant to Sec. 244 of the National Internal Revenue Code, as amended,

SECTION 2.57. Withholding of Tax at Source. —

SECTION 2.57.1. Income Payments Subject to Final Withholding Tax. —

(A) Income payments to a citizen or to a resident alien individual:

(2) Royalties on books, as well as other literary works and musical

(3) Interest income received by an individual taxpayer from a

(4) Interest income from long-term deposit or investment in the form

Holding Period Rate

Four (4) years to less than five (5) years 5%

(5) Cash and/or property dividends actually or constructively received

In case of sale on installment of real property classified as

In case of dispositions of real property classified as capital

In case of sale/transfer of principal residence, the

After depositing the amount representing the six percent

In the issuance of assessments, the Seller shall receive all

(7) Gross income derived from contracts by subcontractors from

(B) Income Payment to Non-resident Aliens Engaged in Trade or Business in

(1) On Certain Passive Income — A tax of twenty (20%) percent is

(a) Cash and/or property dividend from a domestic corporation

(b) Share in the distributable net income after tax of a

(d) Royalties (except royalties on books, as well as other

(e) Prizes (except prizes amounting to ten thousand pesos

(2) Interest income derived from long-term deposit or investment in

Four (4) years to less than five (5) years 5%

In case of sale on installment of real property classified as

In case of dispositions of real property classified as capital

For purposes of these regulations, the term 'cinematographic

(5) Gross income derived from contracts by subcontractors from

(C) Income Derived from All Sources Within the Philippines by a

In case of sale on installment of real property classified as

In case of dispositions of real property classified as capital

(D) Income Payment to a Domestic Corporation. — The following

(2) Royalties derived from sources within the Philippines — Twenty

(3) Interest income derived from a depository bank under the

(4) Income derived by a depository bank under the Expanded Foreign

In case of sale on installment of real property classified as

(6) Gross income derived from contracts by subcontractors from

(E) Income Payment to a Resident Foreign Corporation. — The

(1) Offshore Banking Units — On income derived by offshore

(2) Tax on Branch Profit Remittances — On any profit remitted

Interests, dividends, rents, royalties (including

(4) Interest income derived from a Depository Bank under the

(5) Income derived by a depository bank under the expanded foreign

(6) Gross income derived from contracts by subcontractors from

34% - beginning January 1, 1998

(3) On the gross rentals, lease and charter fees, derived by

(5) Interest on foreign loans contracted on or after August 1, 1986 —

(6) Dividends received from a domestic corporation — Fifteen percent

Employee is a citizen/resident - Thirty-five percent

The grossed-up value of the fringe benefit shall be determined by dividing

Fringe benefits however, which are required by the nature of or necessary to

(2) Expense account;

(4) Household personnel, such as maid, driver and others;

(7) Expenses for foreign travel;

(8) Holiday and vacation expenses;

(9) Educational assistance to the employee or his dependents; and

(10) Life or health insurance and other non-life insurance premiums or

(H) Informer's Reward to Persons Instrumental in the Discovery of

(1) Those given to persons, except an internal revenue official or