Individual Income Tax as Restructured by Batas Pambansa Blg. 135

March 18, 1982 REVENUE REGULATIONS NO. 01-82 SUBJECT : Individual Income Tax as Restructured by Batas Pambansa Blg. 135 TO : All Internal Revenue Officers and Others Concerned Pursuant to Section 326 of the National Internal Revenue Code of 1977, as amended, in relation to Section 15 of Batas Pambansa Blg. 135 , the following regulations to implement the provisions thereof are hereby promulgated. SECTION 1 . Scope . These regulations shall govern the income taxation of individuals, whether citizens or aliens. (Section 21, NIRC, as amended) SECTION 2 . Rates of tax on citizens and residents . (A) On taxable compensation income . Taxable compensation income received from all sources shall be subject to tax in accordance with the following schedule: Not over P2,500 0% Over P2,500 but not over P5,000 1% Over P5,000 but not over P10,000 P25 + 3% of excess over P5,000 Over P10,000 but not over P20,000 P175 + 7% of excess over P10,000 Over P20,000 but not over P40,000 P875 + 11% of excess over P20,000 Over P40,000 but not over P60,000 P3,075 + 15% of excess over P40,000 Over P60,000 but not over P100,000 P6,075 + 19% of excess over P60,000 Over P100,000 but not over P250,000 P13,675 + 24% of excess over P100,000 Over P250,000 but not over P500,000 P49,675 + 29% of excess over P250,000 Over P500,000 P122,175 + 35% of excess over P500,000 (B) On taxable net income . Taxable net income received during each taxable year from all sources shall be subject to tax in accordance with the following schedule: Not over P10,000 5% Over P10,000 but not over P30,000 P 500 + 15% of excess over P10,000 Over P30,000 but not over P150,000 P 3,500 + 30% of excess over P30,000 Over P150,000 but not over P500,000 P 39,500 + 45% of excess over P150,000 Over P500,000 P197,000 + 60% of excess over P500,000 (C) On royalties, prizes and other winnings . A final tax of 15% on the total amount of royalties, prizes and other winnings shall be collected and paid in accordance with Section 15 of these Regulations. "Winnings derived from Philippine Charity Sweepstakes are exempt from this imposition." (D) On interest on deposit or yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements, dividends and share of individual partner in the net profits of taxable partnership . A final withholding income tax shall be collected and paid in accordance with Sections 16-17 of these regulations as follows: (1) Interest on the adjusted gross interest paid or accrued: (i) on savings deposits Fifteen per cent (15%) (ii) on time deposits Twenty per cent (20%) Adjusted gross interest or yield. This is arrived at by deducting from the total interest or yield or any other monetary benefit, all interest and/or yield or any other monetary benefit paid or accrued on: (a) deposit substitute and from trust fund and similar arrangements by tax-exempt entities; (b) inter-bank loans, including those between or among quasi-banks; (c) borrowings from World Bank, Asian Development Bank, International Finance Corporation and similar international financial institutions; and (d) deposit substitutes and from trust fund and similar arrangements exempt from withholding tax. Exceptions: (a) where the depositor/investor is enjoying preferential tax treatment under existing laws, in which case the withholding tax rate to be applied shall be the tax rate applicable to said class of taxpayers or to such type of income as shown in the certificate of preferential tax treatment issued by the Commissioner of Internal Revenue; (b) interest on deposits in foreign currency under the Foreign Currency Deposit Law, the Offshore Banking Act or the Expanded Currency Deposit Law; (c) interest paid on deposits maintained by tax-exempt entities as certified to by the Commissioner of Internal Revenue; (d) interest paid on all deposit accounts maintained by an individual depositor alone or together with another in any one bank not exceeding one thousand pesos (P1,000) per calendar year or two hundred fifty pesos (P250.00) per quarter. However, in cases where the interest earnings of an individual depositor, alone or together with another from all types of deposits held in a bank, exceeds P1,000 per calendar year or P250.00 per quarter thereof, the entire amount of interest earnings shall be subject to withholding tax . (2) Yield or any monetary benefit based on adjusted gross interest or yield paid or from: (i) deposit substitutes twenty percent (20%) (ii) trust fund and similar arrangements twenty percent (20%) Trust fund and similar arrangements . Means an arrangement wherein a fund is maintained by a trust company, bank, or investment house authorized to perform trust functions exclusively for the collective investment and re-investment of certain monies received in its capacity as trustee, or under similar arrangements. Interest received from other sources shall form part of the taxpayer's net taxable income, taxable under paragraph (B) above. (3) Dividends received by individuals from domestic corporations . fifteen per cent (15%) of the total amount thereof. ( 4) Share of individual partners in the net profits of taxable partnership . fifteen per cent (15%) of the total amount thereof. (Section 22, NIRC, as amended) SECTION 3 . Taxation of non-resident alien individuals . Non-resident aliens engaged in trade or business in the Philippines are taxed as follows on income received from sources within the Philippines: cdt (A) On taxable compensation 0% to 35% rates as provided under Section 2(A) of these regulations. (B) On taxable net income 5% to 60% rates as provided under Section 2(B) of these regulations. (C) On interest, dividends, royalties, prizes and other winnings, as well as shares in the net profits of a taxable partnership a final tax of 30% on the total amount thereof to be collected and paid in accordance with Sections 15 to 17 of these Regulations. (Section 23, NIRC, as amended) SECTION 4 . Amounts of personal and additional exemptions . (A) Personal Exemption (1) For single person or a married person judicially decreed as legally separated from his or her spouse three thousand pesos (P3,000) (2) For a married person six thousand pesos (P6,000) (3) For head of the family four thousand and five hundred pesos (P4,500) (B) Additional exemption for dependents For each qualified dependent, but not to exceed four two thousand pesos (P2,000). However, a taxpayer with more than four (4) dependents may claim additional exemptions of P1,000 each for other dependents which qualified as such as of January 1, 1980 . To Illustrate : A taxpayer with six (6) qualified dependents for taxable year 1982 may claim for additional exemptions of P2,000 each for the first four (4) dependents. He may, however, claim P1,000 additional exemption for each of the other two (2) dependents. SECTION 5. Availment of personal exemptions by taxpayer with mixed income . A taxpayer with mixed income (i.e., compensation income and income from business or profession) is required to subtract the amount of personal and additional exemptions he is entitled to from his compensation income. Any excess thereof shall then be allowed as a deduction from his business or professional income . To illustrate : Taxpayer A, married with 4 dependents Compensation income from Co. X P12,000 Business Income (sari-sari store) 8,000 Personal exemption P6,000 Additional exemptions 8,000 ___ Total exemptions P14,000 ====== Availment of personal and additional exemption: 1. Allowable exemptions deductible from gross income P12,000 total gross compensation income -12,000 portion of total personal and additional exemptions allowed as deductions 0 taxable compensation income 2. Allowable exemption deductible from business income P8,000 total business income 2,000 excess of total exemption granted (P14,000- ======= P12,000) P6,000 = net taxable income Personal and additional exemptions may be adjusted by the President, upon the recommendation of the Minister of Finance for not more than once every three years considering the following factors: (1) movements in consumer price indices (2) levels of minimum wages (3) bare subsistence levels (Section 28(a), NIRC, as amended) SECTION 6. Computation of taxable compensation income . Taxable compensation income during the year is determined by deducting from gross compensation income the amount of personal and additional exemptions. Given : A. Employee deriving compensation income from only one employer . Gross Compensation Income P x x x Less: Personal & Additional Exemptions P x x Equals: Taxable Compensation Income P x x Multiply: Appropriate Tax Rate x - % Equals: Income Tax Due P x x ====== B. Employee deriving compensation income from multiple employees . An employee deriving compensation income from two or more employers must aggregate all compensation income received from all his employers in a particular taxable year. Given : Taxpayer A, single Annual compensation income from XY Corp. P40,000 Annual compensation income from W University 5,000 Annual compensation income from X University 3,000 Total gross compensation income P48,000 ====== His total tax liability is computed as follows: Gross Compensation Income P48,000 Less: Personal and Additional Exemptions 3,000 Equals: Taxable Compensation Income P45,000 ====== Multiply: Appropriate Tax Rate Tax on P40,000 = P3,075 Tax on excess of P40,000 = (P5,000 x 15%) = P 750 Equals: Total Tax Liability P3,825 Less: Taxes Withheld 2,826 Amount of tax still due P999 (Section 28 (b), NIRC, as amended) SECTION 7. Definition of gross compensation income . Gross compensation income is defined as income arising out of employer-employee relationship. Generally, an employer-employee relationship exists when the person from whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. SECTION 8. Guidelines for determining gross compensation income . Gross compensation income includes but is not limited to the following income items: a) salaries, wages, honoraria; b) bonuses; c) allowances (such as transportation, entertainment, and the like); d) fringe benefits; e) fees (including director's fees; f) pensions; and g) other income of a similar nature. "Gross compensation income" means all remuneration for services performed by an employee for his employer whether paid in cash or in kind. The name by which the remuneration for services is designated is immaterial. Thus, wages, salaries, fees, bonuses, commissions on sales or on insurance premiums, pensions, and retired pay are wages within the meaning of the statute if paid as compensation for services performed by the employee for his employer. The basis upon which the remuneration is paid is immaterial in determining whether the remuneration constitutes compensation. Thus it may be paid on the basis of piecework, or a percentage of profits; and may be paid hourly, daily, weekly, monthly or annually. Compensation may be paid in money or in some medium other than money, as for example, stocks, bonds, or other forms of property. If services are paid for in a medium other than money, the fair market value of the thing taken in payment is the amount to be included as compensation. If the services were rendered at a stipulated price in the absence of evidence to the contrary such price will be presumed to be the fair value of the remuneration received. If a corporation transfers to its employees its own stock as remuneration for services rendered by the employee, the amount of such remuneration is the fair market value of the stock at the time of the transfer. If a person receives as remuneration for services rendered a salary and in addition thereto living quarters or meals, the value to such person of the quarters and meals so furnished shall be added to the remuneration otherwise paid for the purpose of determining the amount of compensation. cd Ordinarily, facilities or privileges (such as entertainment, medical services, or so-called "courtesy discounts on purchases") furnished or offered by an employer to his employees generally, are not considered as compensation if such facilities or privileges are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, good will, contentment, or efficiency of his employees. Remuneration for services, unless such remuneration is specifically excepted by the statute, constitutes compensation. Even though at the time of payment, there no longer exists, as between the person in whose employ the services were performed and the individual who performed them, an employer-employee relationship. " Pensions and retirement pay ". In general, pensions and retirement pay are wages. (For further clarifications refer to subparagraph (c), paragraph 6 of Sec. 9 of these Regulations). " Travelling and other expenses ." Amounts paid specifically - either as advances or reimbursements for traveling or other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred in the business of the employer are not wages. "Dismissal payment". Any payment made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitute wages regardless of whether the employer is legally bound by contract, statute, or otherwise to make such payment. cd " Fees ". Fees received by an employee for the performance of a service for the employer, including director's fees, are regarded as compensation income. " Payments made by a general professional partnership ". These are not considered compensation income but as a partner's distributive share in the partnership. Such a share is business income taxable under Section 21 (b) of the Tax Code, as amended. (Section 28(c), NIRC, as amended) SECTION 9. Exclusions from gross compensation income . The following income items shall not be included in the determination of gross compensation income and shall be exempt from income tax: 1. Damages . Actual, moral, exemplary and nominal damages received by the employee or his heirs pursuant to a final judgment or compromise agreement arising out of or related to an employer-employee relationship; 2. Life insurance . The proceeds of life insurance policies paid to the heirs or beneficiaries upon the death of the insured, whether in a single sum or otherwise, but if such amounts are held by the insurer under an agreement to pay interest thereon, the interest payments shall be included in gross income; 3. Amount received by insured as a return of premium . The amount received by the insured, as a return of premium or premiums paid by him under life insurance, endowment, or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract; 4. Compensation for injuries or sickness . Amounts received, through accident or health insurance or under Workmen's Compensation Acts, as compensation for personal injuries or sickness, plus the amount of any damages received whether by suit or agreement on account of such injuries or sickness; cd 5. Income exempt under treaty or international commitment . Income of any kind to the extent required by any treaty or international commitment binding upon the Government of the Philippines; 6. Retirement benefits, pensions, gratuities, etc. (a) Retirement benefits received by officials and employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan maintained by the employer: Provided , that the retiring official or employee has been in the service of the same employer for at least ten (10) years and is not less than fifty years of age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph shall be availed of by an official or employee only once. For purposes of this subsection, the term "reasonable private benefit plan" means a pension, gratuity, stock bonus or profit-sharing plan maintained by an employer for the benefit of some or all of his officials or employees, wherein contributions are made by such employer for officials and employees, or both, for the purpose of distributing to such officials and employees the earnings and principal of the fund thus accumulated, and wherein it is provided in said plan that at no time shall any part of the corpus or income of the fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said officials and employees; (b) Any amount received by an official or employees or by his heirs from the employer as a consequence of separation of such official or employee from the service of the employer due to death, sickness or other physical disability or for any cause beyond the control of the said official or employee; (c) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or non-resident citizens of the Philippines from foreign government agencies and other institutions, private or public; (d) Payments of benefits due or become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration; (e) Payments of benefits made under the Social Security Act of 1954, as amended; (f) Benefits received from the GSIS and the retirement gratuity received by government officials and employees. 7. Fees paid to a public official . Authorized fees paid to public officials such as notaries public, clerks of courts, sheriffs, etc. for services rendered in the performance of their official duties. However, the salaries paid to such officials by the Government, by a government agency or instrumentality, are gross compensation income. acd (Section 29(a), NIRC, as amended) SECTION 10 . Computation of taxable net income . Taxable net income is determined by deducting from gross income the following: (a) the amount of deductions allowed by Section 30 of the Tax Code as amended and (b) personal and additional exemptions: To illustrate : Gross income x x x x Less: Allowable Deductions x x x x (i.e., business-related expenses such as depreciation of office equipment, office rentals, among others) Net income x x x x Less: Personal and additional exemptions x x x x Taxable net income Px x x x (Section 29(b), NIRC, as amended) SECTION 11 . Definition of gross income . Gross income includes all incomes enumerated under Section 29(b) of the Tax Code, as amended, such as but not limited to income derived from profession, trade or business except the following: A. Gross compensation income as defined under Section 7 of these Regulations. B. Income items subject to final tax Title II of the Tax Code, as amended, such as: 1. Royalties, prizes exceeding P3,000 and other winnings taxable under Section 21(c) of the Tax Code, as amended. However, prizes amounting to P3,000 or less shall be included in the determination of gross income under this section. 2. Interest from bank deposit and yield or any other monetary benefit from deposit substitutes and from trust fund and similar arrangements taxable under Section 21(d) of the Tax Code, amended. 3. Dividends and share of individual partners in the net profits of taxable partnership taxable under Section 21(e) of the Tax Code, as amended; 4. Net capital gains realized from sale or exchange of shares of stock taxable under Section 34(g) of the Tax Code, as amended; and 5. Net capital gains from the sale or other disposition of real property taxable under Section 34(h) of the Tax Code, as amended . (Section 30, NIRC, as amended) SECTION 12 . Deduction from gross income . A. Itemized deductions . 1. The following items of expenses shall be allowed as deductions only if incurred in connection with the taxpayer's profession, trade or business, subject to restrictions and requirements prescribed under existing income tax regulations. a) Ordinary and necessary business expenses b) Interest c) Taxes d) Losses e) Bad debts f) Depreciation g) Depletion h) Payments to pension trusts In the case of bad debts, such shall be allowed as deduction when actually ascertained as worthless and change off within the taxable year except these sustained in the following transactions: (i) Between members of a family (to include only his brothers and sisters whether by the whole or half blood, spouse, ancestors, and lineal descendants); (ii) Between an individual and a corporation more than 50% in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual; (iii) Between two corporation, more than 50% in value of the outstanding stock of each of which is owned directly or indirectly, by or for the same individual, if either one of such corporation, with respect to the taxable year of the corporation preceding the date of the sale or exchange was, under the law applicable to such taxable year, a personal holding company or a foreign personal holding company; (iv) Between a grantor and a fiduciary of any trust; (v) Between the fiduciary of another trust, if the same person is a grantor with respect to each trust ; or (vi) Between a fiduciary of a trust and beneficiary of such trust. 2. Charitable and other contributions shall be deductible subject to the requirements under Revenue Regulations No. 1-81 implementing Batas Pambansa Blg. 45 . B. Optional standard deduction. Individuals with income taxable under Sec. 21(b) of the Tax Code as amended such as professional, businessmen and the like may choose to deduct a standard deduction in an amount not exceeding 10% of gross income, in lieu of the itemized deductions. acd C. Limitations or ceiling for deductible amounts . The Minister of Finance may prescribe regulations limiting the amount of claimed deductions subject to the following conditions: 1. Previous recommendation by the Commissioner of Internal Revenue. 2. Consideration of the following factors: (a) adequacy of prescribed limits on the actual expenditure requirements of each particular industry, and (b) effect of inflation on expenditure levels. 3. No ceiling shall further be imposed on items of expense already subject to ceiling under existing law. (Section 45, NIRC, as amended) SECTION 13 . Individual returns. A. In general The following individuals are required to file income tax returns in duplicate. If they have gross income of at least P3,000 for the taxable year from sources within or outside the Philippines. (i) Resident and non-resident citizens. (ii) Guardians, trustees, executors, administrators, receivers, conservators, and all others acting in any fiduciary capacity. (iii) Resident aliens. Non-resident aliens engaged in trade or business in the Philippines. The income tax return shall specify gross amount of income from all sources, except that of non-resident aliens engaged in trade or business in the Philippines which shall contain income from source within the Philippines only. B. Individuals with compensation income where the amount of tax withheld is considered final shall file BIR Form No. W-2A either directly with the Bureau of Internal Revenue of through the employer. C. The following individuals are not required to file income tax returns: 1. An individual (except a non-resident alien engaged in trade or business in the Philippines) whose income is (i) derived solely from compensation income; and (ii) such compensation income does not exceed the individual's personal exemption of P3,000 if single or married but judicially decreed as legally separated; or P4,500 if head of a family; and P6,000 if married. casia However, if the individual derives income from other sources in addition to compensation income, he must still file an income tax return if his aggregate gross income from all sources amounts to at least P3,000, regardless of the amount of his personal exemptions. 2. Individual who derive income solely from interest, dividends, royalties and other income items which are subject to final income taxes under the Tax Code, as amended. SECTION 14 . When to file . The income tax return of the following individuals shall be filed as follows: 1. Residents, whether citizens or aliens, whose income had been derived solely from compensation on or before the eighteen day of March of each year covering income from the preceding taxable year. 2. All other individuals including non-resident citizens - on or before the fifteenth day of April of each year covering income of the preceding taxable year. cd i (Section 53(b), NIRC, as amended) SECTION 15 . Withholding of final tax on royalties, prizes and other winnings . A final withholding tax of 15% on the total amount thereof shall be imposed on the following items of income: (a) Royalties . Royalties received during the taxable year by individual whether citizens or aliens residing in the Philippines from any person whether natural or juridical. (b) Prizes . Prizes amounting to more than P3,000 received during the taxable year by citizens alien individuals from any person, whether natural or juridical. Prizes amounting to P3,000 or less shall be subject to the rates imposed by Sec. 21(b) of the Tax Code, as amended. (c) Other winnings . All winnings from all other sources, except the Philippine Charity Sweepstakes. Winnings from the Philippine Charity Sweepstakes will still be exempt from t axation as provided for by R.A. No. 1169. The tax herein imposed shall be collected by the payor and paid as provided in Section 54 of the Tax Code, as amended. (Sec. 53(d), NIRC, as amended) SECTION 16 . Withholding of final tax on dividends . A final tax of 15% on the total amount of dividends received during the taxable year by citizens or residents aliens from a domestic corporation shall be withheld by the payor corporation and paid in the same manner and subject to the same conditions as provided in Section 54 of the Tax Code, as amended. (Sec. 53(d), NIRC, as amended) SECTION 17 . Withholding of final tax on interest from bank deposits, yield or any other monetary benefit from deposit substitute and from trust fund and similar arrangements . (a) Interest on savings deposit . A 15% final tax shall be withheld by the bank from the adjusted gross interest paid or accrued on savings deposits maintained with authorized agent bank. (b) Interest on time deposit or yield or any other monetary benefit from deposit substitute . A 20% final tax shall be withheld by the bank from the interest on time deposits by authorized agent banks and on yield or any other monetary benefit from deposit substitutes by authorized agent banks and nonbank financial intermediaries. Exceptions to (a) and (b): 1. Where the depositor/investor is enjoying preferential tax treatment under existing laws, the withholding tax rate to be applied shall be the tax rate applicable to said class of tax payers or to such type of income as shown in the certificate of preferential tax treatment issued by the Commissioner of Internal Revenue; casia 2. Interest on time deposits in foreign currency under the Foreign Currency Deposit Law, the Offshore Banking Act or the Expanded Currency Deposit Law; 3. Interest on time deposit and yield or any other monetary benefit from deposit substitutes owned by tax-exempt entities as certified by the Commissioner of Internal Revenue; 4. Interest paid on all deposit accounts maintained by an individual alone or together with other in any bank not exceeding P1,000.00 per calendar year or P250.00 per quarter thereof. However, in case where the interest earnings exceeds P1,000.00 per calendar year or P250.00 per quarter thereof, the entire amount of interest earnings shall be subject to withholding tax. 5. Interest on borrowings from World Bank, Asian Development Bank, International Finance Corporation and similar institutions. (c) Yield or any other monetary benefit from trust fund and similar arrangements . Yield/income or any other monetary benefit pertaining to trust fund and similar arrangements shall be subject to a 20% final withholding tax. (Sec. 53, NIRC, as amended) SECTION 18 . Exemption allowed to estate or trusts . An estate or a trust is allowed a personal exemption of P3,000. Each beneficiary is entitled to only one personal exemption regardless of the number of trusts from which he is receiving his income. (Section 61, NIRC, as amended) SECTION 19 . Fiduciary returns . A fiduciary is required to file a return when the gross income of the person, trust, or estate for whom or which he acts amount to P3,000 or more and will be subject to all the provisions of law which apply to individuals. The fiduciary or person filing the return, shall take an oath to the effect that he has sufficient knowledge of the affairs of the person, trust, or estate for whom or which he acts to enable him to make such return and that the same is, to the best of his knowledge and belief, true and correct. A return by one of two or more joint fiduciaries in the form prescribed filed in the province where such fiduciary return shall be sufficient compliance with requirements fiduciary returns. cdt (Section 73, NIRC, as amended) SECTION 20 . Penalty for failure to file return or pay tax . Any one liable to pay the tax, to make a return or to supply information required under the Tax Code, who refuses or neglects to pay such tax, to make such return, or to supply such information at the time or times specified in each year, shall be punished by a fine of two thousand pesos (P2,000) or by imprisonment of not more than six months, or both. In the case of an individual with taxable compensation income and where the tax withheld from such income is final, such individual shall be exempt from the penalty for failure to pay the tax on such compensation income and to file a return thereon at the designated time. An individual or officer of a corporation or general co-partnership (compania colectiva) required by law to make, render, sign or verify any return or to supply any information, who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by the Code, shall be punished by a fine of not less than P5,000 and imprisonment of not less than two years. (Section 77, NIRC, as amended) SECTION 21 . Information at source as to income payments . All persons, corporations or duly registered co-partnerships (companias colectivas), in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees, acting in any trust capacity, executors, administrators, receivers, conservators, and employees making payment to another person, corporation, or duly registered general co-partnership (compania colectiva), of interest, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income, regardless of amount must make a return thereof in duplicate on the form prescribed therefor setting forth the amount of such gains, profits and income, and the name and address of the recipient of such payments. These forms should be attached to and filed together with the annual income tax returns of the recipient of the income payments. A copy of said form shall be attached to the Alphabetical List of payees submitted by the payor to the Bureau of Internal Revenue. The payments referred to herein do not include payments subjected to withholding tax, whether final or creditable. casia (Section 91, NIRC, as amended) SECTION 22 . Income tax collected at source . (a) Requirement of withholding . Every employer making payment of compensation income shall deduct and withhold upon such income the corresponding tax in accordance with the withholding table prescribed under Revenue Regulations No. 20-81. (b) Finality of the withholding tax . The tax withheld is a final tax except where the personal circumstances or income of the taxpayer changes within the taxable year or where the taxpayer has more than one employer. A change in the personal circumstances of a taxpayer includes, among others, his change in civil status, number of dependent children or his status from single or married to head of family and similar situations. Finality of the withholding tax from compensation income of employees with only one employer shall be governed by the provisions of Revenue Regulations No. 20-81. (c) Taxes paid by employee where employer fails to withhold . If the employer fails to deduct and withhold the tax on compensation income paid to his employee at any time during the year and the employee subsequently pays his income tax liability for such year, the tax supposed to have been deducted and withheld shall no longer be collected from the employer. However, the employer shall not be relieved from the liabilities for failure to deduct and withhold the taxes. (d) Refunds or credits . (1) Employer . In case of an over-payment of taxes withheld from compensation income, any refund or credit shall be made to the employer only to the extent that the amount of overpaid tax was shouldered by the employer and not deducted and withheld from the employee. (2) Employees . Taxes deducted and withheld from compensation income during any calendar year shall be allowed as a credit against the total income tax liability of the recipient of such income during the year. Refunds and credits of excess withholding shall be made within three months from April 15, otherwise interest at the rate of 6% per annum, starting from the lapse of the 3-month period to the date the refund or credit is made, shall be paid on the amount to be refunded or credited. (e) Wages paid to non-resident aliens . Wages paid to non-resident aliens engaged in trade or business within the Philippines shall be subject to withholding taxes. casia SECTION 23 . Repealing clause . Any provision of existing regulations or orders which are inconsistent herewith are hereby repealed or modified accordingly. SECTION 24 . Effectivity . These Regulations shall take effect 15 days after publication in two newspapers of general circulation in the Philippines or in the Official Gazette and shall cover incomes of individuals earned beginning January 1, 1982. (SGD) CESAR VIRATA Minister of Finance Recommended by: (SGD.) RUBEN B. ANCHETA Acting Commissioner