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REPUBLIC OF THE PHILIPPINES DEPARTMENT OF …

1 REPUBLIC OF THE PHILIPPINESDEPARTMENT OF FINANCEBUREAU OF INTERNAL REVENUED ecember 27, 2002 REVENUE memorandum circular NO. 1-2003 SUBJECT:Clarifying Certain Provisions of Revenue Regulations No. 3-2002 asamended by Revenue Regulations No. 19-2002 amending Section ofRevenue Regulations 2-98 in relation to the Substituted Filing of IncomeTax Returns of Qualified Pure Compensation Income EarnersTO:All Internal Revenue Officers and Officials ConcernedThe bureau of Internal Revenue (BIR), in its mission of providing an efficient andconvenient service to its taxpayers, is implementing a hassle-free method of filingIndividual Income Tax Returns (BIR Form 1700). This method of filing recognizesunder certain circumstances, the employer s Annual Information Return (BIR Form ) as the substitute income tax return filed by the employee since it contains thesame information found in the income tax return ordinarily circular aims to provide some basic information and answers to questionsfrequently asked on substituted What is Substituted Filing ?

1 REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE December 27, 2002 REVENUE MEMORANDUM CIRCULAR NO. 1-2003 SUBJECT: Clarifying Certain Provisions of Revenue Regulations No. 3-2002 as

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Transcription of REPUBLIC OF THE PHILIPPINES DEPARTMENT OF …

1 1 REPUBLIC OF THE PHILIPPINESDEPARTMENT OF FINANCEBUREAU OF INTERNAL REVENUED ecember 27, 2002 REVENUE memorandum circular NO. 1-2003 SUBJECT:Clarifying Certain Provisions of Revenue Regulations No. 3-2002 asamended by Revenue Regulations No. 19-2002 amending Section ofRevenue Regulations 2-98 in relation to the Substituted Filing of IncomeTax Returns of Qualified Pure Compensation Income EarnersTO:All Internal Revenue Officers and Officials ConcernedThe bureau of Internal Revenue (BIR), in its mission of providing an efficient andconvenient service to its taxpayers, is implementing a hassle-free method of filingIndividual Income Tax Returns (BIR Form 1700). This method of filing recognizesunder certain circumstances, the employer s Annual Information Return (BIR Form ) as the substitute income tax return filed by the employee since it contains thesame information found in the income tax return ordinarily circular aims to provide some basic information and answers to questionsfrequently asked on substituted What is Substituted Filing ?

2 Substituted Filing is when the employer s annual return (BIR Form 1604CF) maybe considered as the substitute Income Tax Return (ITR) of employee inasmuchas the information provided in his income tax return (BIR Form 1700) wouldexactly be the same information contained in the employer s annual return (BIRForm No. 1604-CF).2. How is Substituted Filing different from Non-Filing ?Under substituted filing , an individual taxpayer although required under the lawto file his income tax return, will no longer have to personally file his own incometax return but instead the employer s annual information return filed will beconsidered as the substitute income tax return of the employee inasmuch as theinformation in the employer s return is exactly the same information contained inthe employee s Non-filing is applicable to certain types of individual taxpayers who are notrequired under the law to file an income tax return.

3 An example is an employeewhose pure compensation income does not exceed P60,000, and has only oneemployer for the taxable year and whose tax withheld is equivalent to his tax Who are qualified and under what conditions will substituted filing of BIRForm No. 1700 apply?Substituted filing applies only to individuals who meet all the followingconditions:a. The employee receives purely compensation income (regardless ofamount) during the taxable yearb. The employee receives the income only from one employer in thePhilippines during the taxable yearc. The amount of tax due from the employee at the end of the year equals theamount of tax withheld by the employerd. The employee s spouse also complies with all three (3) conditions The employer files the annual information return (BIR Form No.)

4 1604-CF)f. The employer issues BIR Form 2316 (Oct 2002 ENCS) version to eachemployee4. Who are not qualified for substituted filing of BIR Form 1700?The following individuals are not qualified for substituted filing:a. Individuals deriving compensation income from two or more employees,concurrently or successively at anytime during the taxable yearb. Employees deriving compensation income, regardless of amount, whetherfrom a single or several employers during the calendar year, the incometax of which has not been withheld correctly ( tax due is not equal tothe tax withheld) resulting to a collectible or refundable returnc. Employees whose monthly gross compensation income does not exceedFive Thousand Pesos (P5,000) or the statutory minimum wage, whicheveris higher, and opted for non-withholding of tax on said incomed.

5 Individuals deriving other non-business, non-profession-related income inaddition to compensation not otherwise subject to final taxe. Individuals deriving purely compensation income from a single employer,although the income of which has been correctly subjected to withholdingtax, but whose spouse is not entitled to substituted filingf. Non-resident aliens engaged in trade or business in the Philippinesderiving purely compensation income or compensation income and otherbusiness or profession related income35. What will be presented in case an ITR is required?BIR Form 2316 (Oct 2002 ENCS version) is a statement signed by both theemployee and the employer and serves the same purpose as if BIR Form No. 1700had been filed. This, however, is not to be submitted or filed with the BIR if theemployee is qualified for substituted What are contained in BIR Form No.

6 2316 Certificate?The new BIR Form 2316 (Oct 2002 ENCS version) consists of the followingparts:a. Part I Employee Information (items 3 to 12)This refers to employee s personal information as declared by himin the Certificate of Update of Exemption and Employer s andEmployee s Information (BIR Form 2305). The same informationshould likewise be consistent with the information in the AnnualInformation Return (BIR Form 1604CF).b. Part II Present Employer Information (items 13 to 15A)The information herein refers to the present Part III Previous Employer Information (items 16 to 24A)In cases where an employee has previous employer in the sametaxable year, the present employer should mention the previousemployer s information as contained in the employee s BIR Form2316 issued by the previous Part IV Details of Compensation Income and Tax withheld from thePresent Employer (items 25 to 50)This part contains the details and summary of all taxable and non-taxable regular and supplementary compensation received by theemployee including the summary of taxes withheld from thecompensation of the 1st Signature Box (items no.)

7 51 and 52)This contains a declaration by the present employer that all theinformation contained in BIR Form 2316 (Parts I to IV andSummary) was made in good faith, verified, and to the best of theirknowledge and belief, is true and correct pursuant to the provisionsof the National Internal Revenue 2nd (Substituted Filing) Signature Box (items 53 and 54)This box shall be accomplished under the substituted Who shall prepare and issue BIR Form 2316?In general, every employer or other person who is required to deduct and withholdthe tax on compensation including fringe benefits given to rank and fileemployees, shall furnish every employee from whose compensation taxes have4been withheld the Certificate of Compensation Payment/Tax Withheld (BIR Form2316 Oct 2002 ENCS version).

8 8. When should the employer issue BIR Form 2316?Employers should issue BIR Form 2316 to the employee on or before January 31of the succeeding calendar year, or if employment is terminated before the closeof such calendar year, on the day on which the last payment of compensation What is contained in the Substituted Filing signature box in BIR Form 2316?The lowest portion of BIR Form 2316 (Oct 2002 ENCS version) shall beaccomplished only for substituted filing. It consists of two parts namely, matterscertified to by the employer and matters certified to by the employee. Theemployer and employee, under the pain of perjury, shall sign the boxes forsubstituted For substituted filing, what are the matters being certified to by theEMPLOYER?The matters being certified to by the employer are as follows:a.

9 That the information contained in BIR Form 2316 (Oct 2002 ENCS version)are the same as reported and declared in BIR Form 1604 CF, , The employee s information is the same as that declared by theemployee in BIR Form 2305 If employee had previous employer/s, the previous employer sinformation is the same as that declared in previous employer sBIR Form 2316 issued to said employee The information pertaining to the present employer is true andcorrect The details of compensation and taxes withheld is true and correctb. That the employer filed with the BIR the Annual Information Return (BIRForm 1604CF)11. For substituted filing, what are the matters being certified to by theEMPLOYEE?The matters being certified to by the employee are as follows:a. That the employee is qualified under the substituted filing of income taxreturns (BIR Form 1700), , The employee receives purely compensation income (regardless ofamount) during the taxable year The employee receives the income only from one employer in thePhilippines during the taxable year5 The amount of tax due from the employee at the end of the yearequals the amount of tax withheld by the employerb.

10 If married, that the employee s spouse also complies with all three (3)conditions stated That the employee has none of the instances for disqualification forsubstituted filing. (refer to question no. 4 of this issuance)d. That the BIR Form 1604CF filed by his employer shall constitute as hisincome tax returne. That BIR Form 2316 (Oct 2002 ENCS version) shall serve as the samepurpose as if BIR Form 1700 had been filed pursuant to the provisions of RR3-2002 as amended by RR For other government agencies and other offices, public and private,requiring presentation of individual income tax return (BIR Form 1700) asproof of income earnings, what would be a replacement for BIR Form 1700for those qualified for substituted filing?For those qualified for substituted filing, BIR Form 1700 should no longer berequired as proof of financial capacity or proof of income earnings.


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