Withholding Tax on Wages

July 3, 1959 BIR RULING NO. 329-59 Mr. Nicanor Y. Palma Chief Accountant Ancien Equipment Corporation 181 Kakarong Street Makati, Rizal S i r : Reference is made to your letter dated March 30, 1959, as supplemented by that of May 22, 1959, relative to the withholding tax on wages. We understand therefrom that although the Ancien Equipment Corporation could not pay the salaries of its employees due to lack of funds, it always tried to pay the withholding taxes thereon within the time allowed by law as if the said salaries were actually paid. However, it was not able to pay the withholding taxes on the salaries of Mr. Frederick A. Ancien for March and April and Mr. Walter W. Lathrop for February, March and April. You now ask if the company is bound to pay the withholding taxes on these unpaid salaries. cdta In reply thereto, I have the honor to inform you in the negative for, as long as there is no payment of salaries to employees either actually or constructively, the employer is not bound to withhold and pay the corresponding withholding taxes due thereon, pursuant to section 17, par. (a) of Revenue Regulations No. V-8 of the Department of Finance which is quoted hereunder: "The employer is required to collect the tax by deducting and withholding the amount thereof from the employee's wages as and when paid (emphasis ours), either actually or constructively. An employer is required to deduct and withhold the tax notwithstanding the wages are paid in something other than money (for example, wages paid in stocks or bonds) and to pay the tax to the collecting officer designated in Article 4 of Supplement A. If wages are paid in property other than money, the employer should make necessary arrangements to insure that the amount of the tax required to be withheld is available for payment to the collecting officer." You also asked if the company could be charged monthly interest upon remittances to the Commissioner of tax withheld from salaries which have been actually paid to the employees. In this connection, it is informed that no surcharge or interest will be imposed if the remittance of said withholding tax is made within the time allowed by law, that is, within 25 days after the end of the quarter when payment of salaries were made or, if the tax withheld amounts to P200.00 or more a month, within 10 days after the end of the month when payment of salaries were made excepting those paid on a month which is the close of a quarter the withholding tax on which may be paid within 25 days after the end of the quarter. But if the withholding tax due on said salaries is paid outside of the time prescribed, the employer shall be liable to a surcharge of five per centum of the amount of tax unpaid and interest at the rate of one per centum a month upon the amount required so be paid from the time the same became due until paid, in addition to a compromise in extrajudicial settlement of the penal liabilities arising from such violation, in an amount which shall be determined by this Bureau. Such surcharges, interests and compromises are personal and direct liabilities of the employer to the government. They are not additions to the tax. They are penalties imposed by law upon the employer for failure to comply with his obligation. They cannot therefore be credited or applied to later payment of said employer to the government. cdt Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue