Withholding Tax Case of the Mindanao Construction Co.

March 23, 1959 BIR RULING NO. 157-59 The Regional Directory BIR Regional District No. 3 Manila S i r : This is in connection with the withholding tax case of the Mindanao Construction Co., Inc. which was referred to this Office for advise on the matter. The question involved in the said case is whether or not this Office can grant tax credit or refund the excess withholding tax to the employees of the abovementioned company although the employer failed to remit the amount withheld as prescribed by law. cdta Section 18 of Revenue Regulations No. V-8, as amended, provides that "if the tax has actually been withheld at source, credit or refund shall be made to the recipient of the income even though such tax has not been paid over to the Government by the employer." The Withholding Tax Law provides that the amount withheld shall be constituted as a trust fund for the Government, but it will be noted that it is a trust fund over which the Government has no control and supervision until the same is turned over to it. Under such set up, the Commissioner cannot be required to refund any amount that has not been actually paid to the Government. Section 309 of the Tax Code authorizes the refund or tax credit only of any amount erroneously or illegally paid to the Government. In view of the foregoing, this Office is of the opinion that, notwithstanding the provision of Section 18 of Revenue Regulations No. V-8, no refund or tax credit can be made to the employees cdti