CHAPTER XIII

WITHHOLDING ON WAGES

SEC. 78. Definitions. - As used in this Chapter:

(A) Wages. - The term 'wages' means all remuneration (other than fees paid to a public
official) for services performed by an employee for his employer, including the cash
value of all remuneration paid in any medium other than cash, except that such term
shall not include remuneration paid:

(1) For agricultural labor paid entirely in products of the farm where the labor is
performed, or

(2) For domestic service in a private home, or

(3) For casual labor not in the course of the employer's trade or business, or

(4) For services by a citizen or resident of the Philippines for a foreign government or an

international organization.

If the remuneration paid by an employer to an employee for services performed during

one-half (1/2) or more of any payroll period of not more than thirty-one (31) consecutive
days constitutes wages, all the remuneration paid by such employer to such employee
for such period shall be deemed to be wages; but if the remuneration paid by an
employer to an employee for services performed during more than one -half (1/2) of any
such payroll period does not constitute wages, then none of the remuneration paid by
such employer to such employee for such period shall be deemed to be wages.

(B) Payroll Period. - The term 'payroll period' means a period for which payment of
wages is ordinarily made to the employee by his employer, and the term 'miscellaneous
payroll period' means a payroll period other than, a daily, weekly, biweekly, semi-
monthly, monthly, quarterly, semi-annual, or annual period.

(C) Employee. - The term 'employee' refers to any individual who is the recipient of
wages and includes an officer, employee or elected official of the Government of the
Philippines or any political subdivision, agency or instrumentality thereof. The term
'employee' also includes an officer of a corporation.

(D) Employer. - The term 'employer' means the person for whom an individual
performs or performed any service, of whatever nature, as the employee of such
person, except that:

(1) If the person for whom the individual performs or performed any service does not
have control of the payment of the wages for such services, the term 'employer' (except
for the purpose of Subsection(A) means the person having control of the payment of
such wages; and

(2) In the case of a person paying wages on behalf of a nonresident alien individual,
foreign partnership or foreign corporation not engaged in trade or business within the
Philippines, the term 'employer' (except for the purpose of Subsection(A) means such
person.

SEC. 79. Income Tax Collected at Source. [68]-

(A) Requirement of Withholding. – Except in the case of a minimum wage earner as

defined in Section 22(HH) of this Code, every employer making payment of wages shall
deduct and withhold upon such wages a tax determined in accordance with the rules
and regulations to be prescribed by the Secretary of Finance, upon recommendation of
the Commissioner. [54]

(B) Tax Paid by Recipient. - If the employer, in violation of the provisions of this

Chapter, fails to deduct and withhold the tax as required under this Chapter, and
thereafter the tax against which such tax may be credited is paid, the tax so required to
be deducted and withheld shall not be collected from the employer; but this Subsection
shall in no case relieve the employer from liability for any penalty or addition to the tax
otherwise applicable in respect of such failure to deduct and withhold

(C) Refunds or Credits. –

(1) Employer. - When there has been an overpayment of tax under this Section, refund
or credit shall be made to the employer only to the extent that the amount of such
overpayment was not deducted and withheld hereunder by the employer.

(2) Employees. -The amount deducted and withheld under this Chapter during any
calendar year shall be allowed as a credit to the recipient of such income against the tax
imposed under Section 24(A) of this Title. Refunds and credits in cases of excessive
withholding shall be granted under rules and regulations promulgated by the Secretary
of Finance, upon recommendation of the Commissioner.

Any excess of the taxes withheld over the tax due from the taxpayer shall be returned or
credited within three (3) months from the fifteenth (15th) day of April. Refunds or credits
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 to the date the refund of credit is
made.

Refunds shall be made upon warrants drawn by the Commissioner or by his duly
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 1 of Book V of
Executive Order No. 292, otherwise known as the Administrative Code of 1987. [55]
(D) Withholding on Basis of Average Wages. [4] - The Commissioner may, under
rules and regulations promulgated by the Secretary of Finance, authorize employers to:

(1) Estimate the wages which will be paid to an employee in any quarter of the calendar
year;

(2) Determine the amount to be deducted and withheld upon each payment of wages to
such employee during such quarter as if the appropriate average of the wages so
estimated constituted the actual wages paid; and

(3) Deduct and withhold upon any payment of wages to such employee during such
quarter such amount as may be required to be deducted and withheld during such
quarter without regard to this Subsection.

(E) Nonresident Aliens. [4] - Wages paid to nonresident alien individuals engaged in

trade or business in the Philippines shall be subject to the provisions of this Chapter.

(F) Year-end Adjustment. [4] - On or before the end of the calendar year but prior to the
payment of the compensation for the last payroll period, the employer shall determine
the tax due from each employee on taxable compensation income for the entire taxable
year in accordance with Section 24(A). The difference between the tax due from the
employee for the entire year and the sum of taxes withheld from January to November
shall either be withheld from his salary in December of the current calendar year or
refunded to the employee not later than January 25 of the succeeding year.

SEC. 80. Liability for Tax. -

(A) Employer. - The employer shall be liable for the withholding and remittance of the
correct amount of tax required to be deducted and withheld under this Chapter. If the
employer fails to withhold and remit the correct amount of tax as required to be withheld
under the provision of this Chapter, such tax shall be collected from the employer
together with the penalties or additions to the tax otherwise applicable in respect to such
failure to withhold and remit.

(B) Employee. - Where an employee fails or refuses to file the withholding exemption

certificate or wilfully supplies false or inaccurate information thereunder, the tax
otherwise required to be withheld by the employer shall be collected from him including
penalties or additions to the tax from the due date of remittance until the date of
payment. On the other hand, excess taxes withheld made by the employer due to:

(1) Failure or refusal to file the withholding exemption certificate; or

(2) False and inaccurate information shall not be refunded to the employee but shall be
forfeited in favor of the Government.
SEC. 81. Filing of Return and Payment of Taxes Withheld. - Except as the
Commissioner otherwise permits, taxes deducted and withheld by the employer on
wages of employees shall be covered by a return and paid to an authorized agent bank;
Collection Agent, or the duly authorized Treasurer of the city or municipality where the
employer has his legal residence or principal place of business, or in case the employer
is a corporation, where the principal office is located.

The return shall be filed and the payment made within twenty-five (25) days from the
close of each calendar quarter: Provided, however, That the Commissioner may, with
the approval of the Secretary of Finance, require the employers to pay or deposit the
taxes deducted and withheld at more frequent intervals, in cases where such
requirement is deemed necessary to protect the interest of the Government.

The taxes deducted and withheld by employers shall be held in a special fund in trust
for the Government until the same are paid to the said collecting officers.

SEC. 82. Return and Payment in Case of Government Employees. - If the employer

is the Government of the Philippines or any political subdivision, agency or
instrumentality thereof, the return of the amount deducted and withheld upon any wage
shall be made by the officer or employee having control of the payment of such wage,
or by any officer or employee duly designated for the purpose.

SEC. 83. Statements and Returns. -

(A) Requirements. - Every employer required to deduct and withhold a tax shall furnish
to each such employee in respect of his employment during the calendar year, on or
before January thirty-first (31st) of the succeeding year, or if his employment is
terminated before the close of such calendar year, on the same day of which the last
payment of wages is made, a written statement confirming the wages paid by the
employer to such employee during the calendar year, and the amount of tax deducted
and withheld under this Chapter in respect of such wages. The statement required to be
furnished by this Section in respect of any wage shall contain such other information,
and shall be furnished at such other time and in such form as the Secretary

of Finance, upon the recommendation of the Commissioner, may, by rules and

regulation, prescribe.

(B) Annual Information Returns. - Every employer required to deduct and withhold

the taxes in respect of the wages of his employees shall, on or before January thirty-first
(31st) of the succeeding year, submit to the Commissioner an annual information return
containing a list of employees, the total amount of compensation income of each
employee, the total amount of taxes withheld therefrom during the year, accompanied
by copies of the statement referred to in the preceding paragraph, and such other
information as may be deemed necessary. This return, if made and filed in accordance
with rules and regulations promulgated by the Secretary of Finance, upon
recommendation of the Commissioner, shall be sufficient compliance with the
requirements of Section 68 of this Title in respect of such wages.

(C) Extension of Time. - The Commissioner, under such rules and regulations as may
be promulgated by the Secretary of Finance, may grant to any employer a reasonable
extension of time to furnish and submit the statements and returns required under this
Section.