BIR Ruling

June 18, 1968 Smith, Bell & Co. (Phils.) Inc. Km. 13, South Super Highway Paraaque, Rizal Attention: Mr . C . O . Orofino Asst . Personnel Manager Gentlemen : This refers to your letter dated May 31, 1968 requesting information on a query stated as follows: "Please let us know if a temporary employee engaged merely as Summer Trainee who certainly will not earn at least P1,800.00 a year, is nevertheless subject to withholding tax deductions, during the one or two months period of temporary employment. "We entertain the opinion that since an employee whose earnings do not amount to P1,800 is not required to file Income Tax Returns, it follows that the income of these trainees although more than P150.00 a month, need not be subject to withholding tax deductions inasmuch as after summer, these trainees are definitely going back to school." In reply thereto, I have the honor to inform you that the withholding of the tax on wages (commonly referred to as pay-as-you-go or pay-as-you-earn) is a method of collecting the income tax at source from individual wage earners currently upon the receipt of income. It applies to all individuals deriving income from wages. For this purpose, the employer is constituted as the withholding agent. In other words, the withholding of tax on wages is an advanced payment of income tax such that if no income tax is due from an employee, no tax need be withheld from his wages. In view thereof, and inasmuch as the employee adverted in your query will receive a compensation of less than P1,800.00 within the taxable year such that his total deductions and exemptions would exceed his earnings, this Office believes and so holds that the salary which will be received by the said employee from your company for his one or two months temporary employment during summer at P150.00 a month is exempt from the payment of income tax and necessarily from withholding tax. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue