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2018 withholding updates: The latest BIR guidance

As we enter the fifth month since Republic Act No. 10963 (TRAIN Law) was implemented, the Bureau of Internal Revenue (BIR) released RR No. 11-2018 to establish several amendments implemented by the TRAIN Law on the withholding of income tax.

 

In this article, we take a look at some of the most relevant points for employers and employees:

New forms introduced by RR No. 11-2018

  • BIR Form No. 1601-EQ – Quarterly remittance return of creditable income taxes withheld

  • BIR Form No. 1601-FQ – Quarterly remittance return of final income taxes withheld

  • BIR Form No. 1603 – Quarterly remittance return of final income taxes withheld

All forms are currently available in the eBIRForms Package (Version 7). Payment of taxes withheld at source should be made before the last day of the month after the end of the quarter in which the withholding was made.

The filing deadline for BIR Form No. 1603 was previously set on the 10th day after the quarter or the 15th day for those completing transactions via the electronic filing and payment system.

 

Fringe benefits tax

For non-rank and file employees who are legal Filipino citizens, resident/non-resident aliens who are engaged in business or trade within the country, fringe benefit tax (FBT) is implemented at a 35% fixed rate on the gross monetary value of received fringe benefits.

 

Minimum Wage Earners’ (MWEs) taxable income

RR No. 11-2018 has no effect on the taxation of MWEs, as they are exempt from income tax imposed on earnings such as holiday pay, overtime pay, hazard pay, night differential pay, and the statutory minimum wage as fixed by the RTWB and NWPC. Apart from these tax-exempted earnings, additional compensation exceeding the permissible statutory amount of P90,000, taxable allowances and other forms of taxable income received by MWEs will be subject to withholding tax with the applied graduated income tax rates of 0% to 35%. The initial P250,000 of MWEs’ additional compensation is tax-exempt.

 

Exclusions from gross income under the TRAIN Law

The total exclusion for 13th month pay as well as additional benefits given to officials and employees under private and public entities is at the maximum amount of P90,000. P82,000 was the previous maximum exclusion cap.

 

Employee registration

The registration process for acquiring the Tax Identification Number (TIN) is more streamlined, excluding data requirements for dependent claims. Usage of the e-Registration option for obtaining a TIN was also highlighted.

BIR Form No. 1902 requires the following information from employees:

  • Name

  • TIN

  • Residential address

  • Civil Status

  • Occupational status of spouse (if applicable)

 

Attachments that are required upon filing BIR Form No. 1902 include:

  • Proof of identification issued by any authorized government body that includes the applicant’s full name, birth date, and address (e.g. birth certificate, driver’s license, passport).

  • Copy of marriage contract (if applicable)

  • For alien employees, passport and working permit/copy of application for alien employment permit from the Department of Labor and Employment (DOLE)

 

Three copies of BIR Form No. 1902 are to be accomplished by manual filers, with each copy provided to the BIR, the employer, and the employee. Employers must file the form to the BIR within ten days following the date of employment. Employers also have the option of securing the TIN for new employees through BIR’s eRegistration System.

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