BIR Ruling [DA-003-00]

January 5, 2000 BIR RULING [DA-003-00] Jose Cojuangco & Sons, Inc . JCS Building, 119 de la Rosa Street Legaspi Village, Makati City Metro Manila Attention: Atty . Fernando C . Cojuangco General Counsel Gentlemen : This refers to your letter dated November 23, 1999 requesting reconsideration of the Preliminary Assessment Notice dated October 15, 1999 showing that you are liable to pay the amount of P263,281.64 representing the amount of overwithholding of tax from the compensation paid to some of your employees in 1998, inclusive of compromise penalty for non-compliance with the year-end adjustment as required under Section 72(H) of the Tax Code of 1997. It appears that you failed to refund to the following employees the amounts overwithheld from their compensation: 1. C. Aquino 2. O. Azul 3. P. Cojuangco 4. B. Lahoz 5. T. Lopa 6. E. Teopazo 7. D. Teopazo In reply, please be informed that the pertinent portion of Sec. 2.80(A)(3) of Revenue Regulations No. 2-98 provides, viz: "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 amount withheld over the tax actually due on the return". The aforequoted provision clearly makes it the duty of employers/withholding agents to refund excess withholding taxes on or before January 25 of the succeeding year under pain of being subjected to penalty equivalent to the total amount of refund which was not refunded to the employee resulting to an overwithheld tax than what is actually due from the said employee. There is no necessity of dwelling upon your argument that under the global system of taxing individuals as restored under R.A. No. 8424, the withholding tax can no longer be considered final and the correct income tax due from the employee as it was treated under R.A. No. 7479 in relation to R.A. No. 7496. In view, however, of your allegation that "the income taxes due from the employees were fully accounted for partly through the amount withheld from their remuneration and partly through payments made by the employees themselves and that the employer did not derive financial advantage on what it actually remitted to the BIR",we have decided to cancel the proposed Preliminary Assessment requiring you to pay the aforesaid amount of P263,281.64. It is, however, requested that xerox copies of the income tax returns of the abovenamed employees for the year 1998 be sent to this Office in order that we can verify your allegation that the said amount has already been remitted to the BIR and credited by the employees concerned against their taxable income, before your case may be finally closed and terminated. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue