Obligation to Withhold Income Taxes on Backwages Granted Pursuant to a Wage Discrimination/Wage Distortion Dispute

January 25, 1995 BIR RULING NO. 011-95 72 000-00 011-95 Sanitary Wares Manufacturing Corporation Executive Office, 2/F Feliza Building 108 Herrera Street, Legazpi Village Makati, Metro Manila 3116 Attention: Mr . Leonardo R . Dominguez Vice President-Finance & Administration Gentlemen : This refers to your letter dated December 6, 1994 requesting for a ruling as to whether or not you are under obligation to withhold after the fact the corresponding income taxes from 54 of your employees who were granted backwages by voluntary Arbitrator Josephus Jimenez, pursuant to a wage discrimination/wage distortion dispute [G.R. NO. 115714 (ADA-JBJ-001-07-94)] between your company and the Samahan ng Mangagawa sa Saniwares Union. cdti It is represented that the union was able to withdraw Company funds deposited at Security Bank and Trust Company, Ayala Avenue, Makati amounting to P2,482,212.74 thru a Writ of Garnishment issued by a Sheriff from the National Labor Relations Commission and distributed the amount by themselves without your knowledge and participation to each of the following employees : NAME AMOUNT 1. Elpidio G. Panlilio P50,317.37 2. Aurora Teresita O. Alimario 50,317.37 3. Remedios P. Natcher 50,317.37 4. Ariel R. Rake 50,317.37 5. Lourdes B. Diamitas 56,349.66 6. Lorna M. Lobo 56,349.66 7. Dominador P. Yumang III 56,349.66 8. Veronica P. Lopez 44,937.22 9. Cesar T. Capuloy 44,937.22 10. Emilia P. Divino 44,937.22 11. Conrado P. Sta. Rosa 35,807.27 12. Orlando C. David 35,807.27 13. Eduardo F. Vinoya 35,807.27 14. Elner S. Cunanan 35,807.27 15. Eduardo M. Pescasio 35,807.27 16. Teodoro J. Elizan 46,613.29 17. Marcelo L. Soverano 56,349.66 18. Erico P. Antazo 56,349.66 19. Octavio A. Adriano, Sr. 50,317.37 20. Ventura V. Mateo 50,317.37 21. Rutelio V. Igpura 44,937.22 22. Mario R. Cruz, Sr. 44,937.22 23. Ceferino L. Nanez 35,807.27 24. Ricardo A. Enriquez 35,807.27 25. Gloria G. Reyes 35,807.27 26. Victor J. Plana 35,807.27 27. Eduardo P. Rivera 35,807.27 28. Edilberto I. Rellona 35,807.27 29. Jimmy S. Gamboa 35,807.27 30. Herman D. de Castro 35,807.27 31. Pablo G. Magnait 35,807.27 32. Rosanna P. Gonzales 44,937.22 33. Elisa D. Pagalunan 12,455.51 34. Adelina A. Villamor 44,937.22 35. Marcelina B. Julian 44,937.22 36. Josefina Q. Salvador 44,937.22 37. Diego P. Padua 44,937.22 38. Edgardo I. Malasig 44,937.22 39. Ma. Cecilia T. Ayeres 44,937.22 40. Elza D. Balajadia 44,937.22 41. Mercy V. Ocampo 44,937.22 42. Arturo L. Esquierdo 44,937.22 43. Francisco H. Letracion 50,317.37 44. Severino M. Alcazar 50,317.37 45. Carlos V. Mallen 56,349.66 46. Simeon A. Yamat 56,349.66 47. Belinda M. del Rosarion 56,349.66 48. Nenita S. Barroga 56,349.66 49. Emilia B. Espiritu 56,349.66 50. Elinita C. Bayan 56,349.66 51. Rosella R. Austria 56,349.66 52. Jeannette R. Joseph 56,349.66 53. Jose Q. Arabia 56,349.66 54. Maximo S. Espinosa 56,349.66 TOTAL P2,482,212.74 =========== that you are of the opinion that it is the union and not your Company which should withhold and remit the corresponding taxes to this Office considering that the union on its own disbursed and distributed the taxable income. In reply, please be informed that under Section 6 of Revenue Regulations No. 6-82, as amended, implementing Section 72 of the Tax Code, as amended, if the person for whom the services are or were performed does not have legal control of the payment of the compensation for such services, the term "employer" means the person having such control. Such being the case, and since in the instant case, the Samahan ng Mangagawa sa Saniwares Union had legal control of the payment of backwages of your aforesaid enumerated employees, the said labor union is therefore, the withholding agent insofar as those payment of backwages is concerned. Accordingly, for purposes of the withholding requirement under Section 72(a) of the Tax Code, as amended, the said labor union and not you, is under obligation to withhold and remit the corresponding tax on compensation on the aforesaid backwages of your aforesaid enumerated employees. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue