RR No. 2-98 (As Amended by TRAIN Law)

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
(B) Creditable Withholding Tax. — Under the creditable withholding tax
Copyright 2018 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Third Release 2018 1
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
with Sec. 6(E) of the Code (i.e. the authority of the
Commissioner to prescribe zonal values), whichever is higher
— Six percent (6%).

creditable.

determined either 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.

(6) Capital Gains from Sale of Shares of Stock Not Traded in

the Stock Exchange. — On net capital gains realized during
(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
with 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%).

creditable.

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.

(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
with Sec. 6(E) of the Code, whichever is higher — Six percent
(6%).

creditable.


(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
(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
(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 payments 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, as determined by the Commissioner, to their local/resident supplier of
goods/services, 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 include the following:
(a) Classified and duly notified by the Commissioner as either

any of the following unless previously de-classified as such
or had already ceased business operations:
(1) A large taxpayer under Revenue Regulations No.

1-98, as amended;
(2) Top twenty thousand (20,000) private corporates

under RR No. 6-2009; or
(3) Top five thousand (5,000) individuals under RR No.
6-2009.
(b) Taxpayers identified and included as Medium Taxpayers,

and those under the Taxpayer Account Management
Program (TAMP).
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.
Existing withholding agents classified as large taxpayers,
top 20,000 private corporations or top 5,000 individuals
which have not been delisted prior to these regulations shall
remain as 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 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.
14814 of April 9, 2003 to customers under Phase IV as
approved by ERC — On gross amount of refund given by
MERALCO to Customers with active contracts as classified by
MERALCO — Twenty Five Percent (25%); To Customers with
terminated contracts — Thirty Two Percent (32%); and
(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 Energy Regulatory
Commission under Resolution No. 8, Series of 2008, dated June
4, 2008 implementing Article 8 of the Magna Carta for
Residential Electricity Consumers 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 whether paid directly to the customers or

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

electricity consumption exceeds 200 kwh as classified by
MERALCO — Ten percent (10%);
(ii) Non-Residential customers — Twenty percent (20%);

(Q) Interest income on the refund paid either through direct
payment or application against customers' billings by other electric Distribution
Utilities (DUs) in accordance with the rules embodied in ERC Resolution No. 8,
Series of 2008, dated June 4, 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 Consumers 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 whether paid directly to the customers or

applied against customer's billing:
(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 — Twenty percent (20%).
(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 14-2012,
unless otherwise provided by law or regulations — Twenty Percent (20%).
(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:

0
Less: Income exempt from income tax — 180,000.00

SMW
–––––––––
––
–––––––––
––
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

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 beginning January 2018 is computed by referring to
compensation 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

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:
procedures 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:
procedures 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.

RR No. 2-98 (As Amended by TRAIN Law)

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RR No. 2-98 (As Amended by TRAIN Law)

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April 17, 1998

REVENUE REGULATIONS NO. 02-98

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

TO : All Internal Revenue Officers and Others Concerned

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

SECTION 2.57. Withholding of Tax at Source. —

(B) Creditable Withholding Tax. — Under the creditable withholding tax

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

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

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

In case of sale on installment of real property classified

In case of dispositions of real property classified as

In case of sale/transfer of principal residence, the

After depositing the amount representing the six percent

If within thirty (30) days after the lapse of the aforesaid

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

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

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

(c) Interests from any currency bank deposit and yield or

(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

Holding Period Rate

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

In case of sale on installment of real property classified

In case of dispositions of real property classified as

For purposes of these regulations, the term

(5) Gross income derived from contracts by subcontractors from

(6) Capital Gains from Sale of Shares of Stock Not Traded in

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

In case of sale on installment of real property classified

In case of dispositions of real property classified as

(3) Capital Gains from Sale of Shares of Stock Not Traded in

(2) Royalties derived from sources within the Philippines —

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

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

In case of sale on installment of real property classified

(6) Gross income derived from contracts by subcontractors from

(7) Capital Gains from Sale of Shares of Stock Not Traded in

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

(1) Offshore Banking Units — On income derived by

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

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

(6) Gross income derived from contracts by subcontractors from

(F) Income Derived From all Sources Within the Philippines by

(1) In general — On gross income derived from all sources within

34% - beginning January 1, 1998

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

(4) On the gross rentals, charter and other fees derived by

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

(6) Dividends received from a domestic corporation — Fifteen

Employee is a citizen/resident - Thirty-five percent

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

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

(2) Expense account;