Collection at Source of Income Tax on Wages

May 2, 1967 REVENUE REGULATIONS NO. 02-67 FURTHER AMENDING REVENUE REGULATIONS NO. V-8, AS AMENDED BY REVENUE REGULATIONS NO. V-70 SUBJECT : Collection at Source of Income Tax on Wages TO : All Internal Revenue Officers and Others Concerned SECTION 1. Scope . Pursuant to the provisions of section 338 of the National Internal Revenue Code and Article 2 (d) of Supplement A to Title II, of the same Code, the following regulations are promulgated relative to the collection at source of income tax on wages paid on or after January 1, 1951. The withholding of the tax on wages (commonly referred to as pay-as-you-go or pay-as-you-earn) is a method of collecting the income tax currently upon the receipt of the income. It applies to all individuals deriving income from wages, the employer is constituted as the withholding agent. cdtech (The provisions appearing below are reproduced from Supplement A to Title II of the National Internal Revenue Code.) "SUPPLEMENT A WITHHOLDING ON WAGES Article 1. Definitions . As used in this supplement: (a) Wages . The term "wages" means all remunerations (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash; except that such term shall not include remuneration paid (1) for agricultural labor paid entirely in products of the farm where the labor is performed, or (2) for domestic service in a private home, or (3) for casual labor not in the course of the employer's trade or business, or (4) for services by a citizen or resident of the Philippines for a foreign government or an international organization. If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than thirty-one consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages." SECTION 2. Wages . (a) In general. The term "wages" means all remuneration for services performed by an employee for his employer unless specifically excepted under Article 1(a) of Supplement A to Title II of the National Internal Revenue Code. The name by which the remuneration for services is designated is immaterial. Thus, 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 constitute wages. 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. Wages 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 wages subject to withholding. If the services are rendered as wages subject to withholding. If the services were rendered at a stipulated price, in the absence or 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 purposes of determining the amount of wages subject to withholding. If, however, living quarters or meals are furnished to an employee for the convenience of the employer, the value thereof need not be included as wages subject to withholdings. 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 wages subject to withholding 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. Where 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 Commissioner of Internal Revenue. Tips or gratuities paid directly to an employee by a customer of an employer, and not accounted for by the employee to the employer, are not subject to withholding. Remuneration for services, unless such remuneration is specifically excepted by the statute, constitutes wages even though at the time paid the relationship of employer and employee no longer exists between the person in whose employ the services were performed and the individual who performed them. (b) Pensions and Retired Pay . In general, pensions and retired pay are wages subject to withholding. So-called pensions awarded by one to whom no services have been rendered are mere gifts or gratuities and do not constitute wages. (c) Traveling 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 and are not subject to withholding. Traveling and other reimbursed expenses must be identified either by making a separate payment or by specifically indicating the separate amounts where both wages and expense allowances are combined in a single payment. (d) Vacation Allowances . Amounts of so-called "vacation allowances" paid to an employee constitute wages. Thus, the salary of an employee on vacation, paid notwithstanding his absence from work, constitutes wages. (e) Dismissal Payments . Any payment made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitutes wages regardless of whether the employer is legally bound by contract, statute, or otherwise to make such payment. (f) Deductions by Employer from Wages of Employee . The amount of any tax which is required by law to be deducted by the employer from the wages of an employee is considered to be a part of the employee's wages and is deemed to be paid to the employee as wages at the time the deduction is made. It is immaterial that the National Internal Revenue Code requires such deductions and the payment of the amounts thereof to the Government. (g) Remuneration for Services as Employee of Nonresident Alien Individual or Foreign Entity . The term "wages" includes remuneration for services performed by a citizen or resident of the Philippines, as an employee of a nonresident alien individual, foreign partnership or foreign corporation whether or not such alien individual or foreign entity is engaged in trade or business within the Philippines. Any person, paying wages on behalf of a nonresident alien individual, foreign partnership, or foreign corporation not engaged in trade or business within the Philippines is subject to all provisions of law and regulations applicable with respect to an employer. SECTION 3. Exclusives from Wages . (a) 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 are excepted from the definition of the term "wages" and hence are not subject to withholding. However, salaries paid such officials by the Government, or government agency or instrumentality, are subject to withholding. (b) Remuneration Paid for Agricultural Labor . (1) In general. The term "wages" does not include remuneration for services which constitute agricultural labor and paid entirely in products of the farm where the labor is performed. In general, however, the term "agricultural labor" does not include services performed in connection with forestry, lumbering or landscaping. (2) Services Constituting Agricultural Labor . Remuneration paid entirely in products of the farm where the labor is performed for services performed on a farm by an employee of any person in connection with any of the following activities is excepted as remuneration for agricultural labor: (i) The cultivation of the soil; (ii) The raising, shearing, feeding, caring for, training, or management of livestock, bees, poultry, or wildlife; or (iii) The raising or harvesting or any other agricultural or horticultural commodity. The term "farm" as used in this subsection includes stocks, dairy, poultry, fruit, and truck farms, plantations, ranches, nurseries, ranges, orchards, and such green-houses and other similar structures as are used primarily for the raising of agricultural or horticultural commodities. (3) The remuneration paid entirely in products of the farm where labor is performed for the following services performed by an employee in the employ of the owner or tenant or other operator of one or more farms is excepted as remuneration for agricultural labor, provided the major part of such services is performed on a farm: (i) Services performed in connection with the operation, management, conservation, improvement, or maintenance of any such farms or its tools or equipment; or (ii) Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane or typhoon. The services described in (i) above may include, for example, services performed by carpenters, painters, mechanics, farm supervisors, irrigation engineers, bookkeepers, and other skilled or semi-skilled workers, which contribute in any way to the conduct of the farm or farms, as such, operated by the person employing them, as distinguished from any other enterprise in which such person may be engaged. Since the services described in this paragraph must be performed in the employ of the owner or tenant or other operator of the farm, the exception does not extend to remuneration paid for services performed by employees of a commercial painting concern, for example, which contracts with a farmer to renovate his farm properties. (4) Remuneration paid entirely in products of the farm where labor is performed for services performed by an employee in the employ of any person in connection with any of the following operations is excepted as remuneration for agricultural labor without regard to the place where such services are performed: (i) The making of copra, stripping of abaca, etc.; (ii) The hatching of poultry; (iii) The raising of fish; (iv) The operation or maintenance of ditches, canals, reservoirs, or waterways used exclusively for supplying or storing water for farming purposes; (v) The production or harvesting of crude gum from a living tree or the processing of such crude gum into gum spirits of turpentine and gum resin, provided such processing is carried on by the original producer of such crude gum. (5) Remuneration paid entirely in products of the farm where labor is performed for services performed by an employee in the employ of a farmer or a farmers' cooperative organization or group in the handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivering to storage or to market or to a carrier for transportation to market, of any agricultural or horticultural commodity, produced by such farmer or farmer-members of such organization or group, is excepted as remuneration for agricultural labor. Services performed by employees of such farmer or farmers' organization or group in the handling, planting, drying, packing, packaging, processing, freezing, grading, storing, or delivering to storage or to market or to a carrier for transportation to market or commodities produced by persons other than such farmer or members of such farmers' organization or group are not performed "as an incident to ordinary farming operations." All payments made in cash or other forms other than products of the farm where labor is performed, for services constituting agricultural labor as explained above, are not within the exception. (c) Remuneration for Private Service in a Private Home . Remuneration paid for services of a household nature performed by an employee in or about the private home of the person by whom he is employed is excepted from the term "wages". A private home is the fixed place of abode of an individual or family. If the home is utilized primarily for the purpose of supplying board or lodging to the public as a business enterprise, it ceases to be a private home and the remuneration paid for services performed therein is not excepted. In general, services of a household nature in or about a private home includes services rendered by cooks, maids, butlers, valets, laundresses, gardeners, chauffeurs of automobiles for family use. The remuneration paid for the services above enumerated is not within the exception if performed in or about rooming or lodging-houses, boarding houses, clubs, hotels, hospitals, or commercial offices or establishments. Remuneration paid for services performed as a private secretary, even though performed in the employer's home, is not within the exception. (d) Remuneration for Casual Labor Not in the Course of Employer's Trade or Business . The term "casual labor" includes labor which is occasional, incidental or irregular. The expression "not in the course of the employer's trade or business" includes labor that does not promote or advance the trade or business of the employer. Thus, remuneration paid for labor which is occasional, incidental or irregular, and does not promote or advance the employer's trade or business, is excepted. Example: A's business is that of operating a sawmill. He employs B, a carpenter, at an hourly wage to repair his home. B works irregularly and spends the greater part of two days in completing the work. Since B's labor is casual and is not in the course of A's trade or business the remuneration paid for such services is excepted. The remuneration paid for casual labor, that is, labor which is occasional, incidental, or irregular, but which is in the course of the employer's trade or business, does not come within the above exception. Example (1) C's Business is that of Operating a Sawmill . He employs D for two hours, at an hourly wage, to remove sawdust from his mill. D's labor is casual since it is occasional, incidental or irregular, but it is in the course of C's trade or business and the remuneration paid for such labor is not excepted. Example (2) E is Engaged in the Business of Operating a Department Store . He employs additional clerks for short periods. While the services of the clerks may be casual, they are in the course of the employer's trade or business and, therefore, the remuneration paid for such services is not excepted. Remuneration paid for casual labor performed for a corporation does not come within this exception. (e) Compensation for Services by a Citizen or Resident of the Philippines for a Foreign Government or an International Organization . Remuneration paid for services performed as an employee of a foreign government is excepted. The exception includes not only remuneration paid for services performed by ambassadors, ministers, and other diplomatic officers and employees but also remuneration paid for services performed as consular or other officer or employee of a foreign government or as a non-diplomatic representative of such government. Compensation paid for services in the United States government offices, military establishments and naval bases which under our Income Tax Law are not subject to income tax are also excepted from the withholding provisions. "Art. 1 (b) Payroll Period . The term "payroll period" means a period for which a payment of wages is ordinarily made to the employees by his employer, and the term "miscellaneous payroll period" means a payroll period other than a daily, weekly, bi-weekly, semi-monthly, monthly quarterly, semi-annual or annual period." SECTION 4. Payroll Period . The "payroll period" means the period of service for which a payment of wages is ordinarily made to an employee by his employer. It is immaterial that the wages are not always paid at regular intervals. For example, if an employer ordinarily pays a particular employee for each calendar week at the end of the week, but if for some reason the employee in a given week receives a payment in the middle of the week for the portion of the week already elapsed and receives the remainder at the end of the week, the payroll period is still the calendar week; or if, instead, that employee is sent on a 3-weeks trip by his employer and receives at the end of the trip a single wage payment for 3 weeks services, the payroll periods is still the calendar week, and the wage payment shall be treated as though it were 3 separate weekly wage payments. For the purpose of determination of the tax, an employee can have but one payroll period with respect to wages paid by any one employer. Thus, if an employee is paid a regular wage for a weekly payroll and in addition thereto is paid supplemental wages (for example, bonuses) determined with respect to a different period, the payroll period is the weekly payroll period. "Art. 1 (c) Employee . The term "employee" refers to any individual who is the recipient of wages and includes an officer, employee or elected official of the Government of the Philippines or any political subdivision, agency or instrumentality thereof. The term "employee" also includes an officer of a corporation." SECTION 5. Employee . The term "employee" includes every individual performing services if the relationship between him and the person for whom he performs such services is the legal relationship of employer and employee. The term specifically includes officers and employees, whether elected or appointed, of the Government of the Philippines, or any political subdivision thereof or any agency or instrumentality of any one or more of the foregoing. Generally the relationship of employer and employee exists when the person for 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. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are furnishing the tools and furnishing of a place to work, to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is not an employee. Generally, physicians, lawyers, dentists, veterinarians, contractors, sub-contractors, public stenographers, auctioneers, and others who follow an independent trade, business, or profession, in which they offer their services to the public, are not employees. Whether the relationship of employer and employee exists will in doubtful cases be determined upon an examination of the particular facts of each case. If the relationship of employer and employee exists, the designation or description of the relationship by the parties as anything other than that of employer and employee is immaterial. Thus if such relationship exists, it is of no consequence that the employee is designated as a partner, co-adventurer, agent, or independent contractor. The measurement, method or designation of compensation is also immaterial, if the relationship of employer and employee in fact exists. No distinction is made between classes or grades of employees. Thus, superintendents, managers, and other superior employees are employees. An officer of a corporation is an employee of the corporation but a director as such is not. If, however, a director performs services for the corporation other than those required by attendance at and participation in meetings of the board of directors, he may or may not be an employee of the corporation. Whether or not such services are performed as an employee of the corporation must be determined upon the basis of the facts in the particular case. Although an individual may be an employee under the statute, his services may be of such a nature, or performed under such circumstances, that the remuneration paid for such services does not constitute wages within the meaning of Article 1(a). "Art. 1 (d) Employer . The term "employer" means the person for whom an individual performs or performed any service, of whatever nature, as the employee of such person, except that (1) If the person for whom the individual performs or performed any services does not have control of the payment of the wages for such services, the term "employer" [except for the purposes of sub-article (a)] means the person having control of the payment of such wages; and (2) In the case of a person paying wages on behalf of a non-resident alien individual, foreign partnership or foreign corporation, not engaged in trade or business within the Philippines, the term "employer" [except for the purposes of sub-article (a)] means such person." SECTION 6. The term employer means any person for whom an individual performs or performed any service, of whatever nature, as the employee of such person. It is not necessary that the services be continuing at the time the wages are paid in order that the status of employer may exist. Thus, for purposes of withholding, a person for whom an individual has performed past services for which he is still receiving wages from such person is an "employer". If the person for whom the services are or were performed does not have legal control of the payment of the wages for such services, the term "employer" means (except for the purposes of the definition of wages) the person having such control. For example, where wages, such as certain types of pensions or retired pay, are paid by a trust and the person for whom the services were performed has no legal control over the payment of such wages, the trust is the "employer". The term "employer" also means (except for the purpose of the definition of wages) any person paying wages on behalf of a non-resident alien individual, foreign partnership, or foreign corporation, not engaged in trade or business within the Philippines. It is the basic purpose to centralize in the employer the responsibility for withholding, returning and paying the tax and furnishing the statements required under this Title. The foregoing two special definitions of the term "employer" are designed solely to meet unusual situations. They are not intended as a departure from the basic purpose. As a matter of business administration, certain of the mechanical details of the withholding process may be handled by representatives of the employer. Thus, in the case of a corporate employer having branch offices, the branch manager or other representative may actually, as a matter of internal administration, withhold the tax or prepare the statements required under the law. Nevertheless, the legal responsibility for withholding, paying, and returning the tax and furnishing such statements rests with the corporate employer. An employer may be an individual, a corporation, a partnership, a trust, an estate, a joint-stock company, an association, or a syndicate, group, pool, joint venture, or other unincorporated organization, group or entity. A trust or estate, rather than the fiduciary acting for or on behalf of the trust or estate, is generally the employer. The term "employer" embraces not only individuals and organizations engaged in trade or business, but organizations exempt from income tax, such as charitable organizations, clubs, social organizations and societies, as well as the Government of the Philippines, including its agencies, instrumentalities, and political subdivisions. "Art. 2. Income Tax Collected at Source . (a) Requirement of withholding. Every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with a withholding table to be prepared by the Secretary of Finance." SECTION 7. Employer to Withhold . (1) Every employer who pays wages to an employee must withhold from such wages paid, an amount computed in accordance with the following tables. lexlib QUARTERLY PAYROLL PERIOD If the payroll period with respect to an employee is quarterly, the amount of tax to be withheld shall be computed as follows: 1. Divide the wage by 3 to determine in which bracket of the monthly withholding table the quotient will fall. 2. Then multiply by 3 the amount of tax corresponding to such bracket and to the employee's personal exemption column. The result will be the required amount of tax to be withheld. SEMIANNUAL PAYROLL PERIOD If the payroll period with respect to an employee is semiannual, the amount of tax to be withheld shall be computed as follows: 1. Divide the wage by 6 to determine in which bracket of the monthly withholding table the quotient will fall. 2. Then multiply by 6 the amount of tax corresponding to such bracket and to the employee's personal exemption column. The result will be the required amount of tax to be withheld. ANNUAL PAYROLL PERIOD If the payroll period with respect to an employee is annual, the amount of tax to be withheld shall be computed as follows: 1. Divide the wage by 12 to determine in which bracket of the monthly withholding table the quotient will fall. 2. Then multiply by 12 the amount of tax corresponding to such bracket and to the employee's personal exemption column. The result will be the required amount of tax to be withheld. Determination of the amount of tax to be withheld: (a) The amount to be withheld from wages paid is determined by means of the Government wage bracket withholding tables prescribed above. Separate tables are prescribed for different payroll periods such as the daily or miscellaneous, weekly, bi-weekly, semi-monthly, monthly, quarterly, semi-annually and annually. (b) Under the above tables the amount of tax to be withheld depends upon the number of withholding exemptions claimed by the employee on his withholding exemption certificate filed with his employer and the amount of his payroll income. (c) The line to be used in the tables is that for the bracket into which the particular wage payment fits, and the column to be used is determined from the withholding exemptions claimed by the employee on his withholding exemption certificate filed with his employer. (2) The table applicable to a daily or miscellaneous payroll period shows the tax on the amount of wages for one day. The amount to be withheld in respect to a miscellaneous payroll period is arrived at as follows: Reduce the wages paid for the period to a daily basis by dividing the total wages by the number of days in the period. Apply the table to the wages so determined and multiply the result by the number of days in the period. cdta (3) Period Not a Payroll Period . If wages are paid for a period which is not a payroll period, the amount to be deducted and withheld shall be the amount applicable in the case of a miscellaneous payroll period containing a number of days (including Sundays and holidays) equal to the number of days in the period with respect to which such wages are paid. (4) Wages Paid Without Regard to Any Period . If wages are paid without regard to any period, as, for instance, commissions paid to a salesman upon consummated of a sale, the amount of tax to be deducted and withheld shall be determined in the same manner as in the case of a miscellaneous payroll period containing a number of days equal to the number of days (including Sundays and holidays) which have elapsed since the date of the last payment of wages by such employer during the calendar year, or the date or commencement of employment with such employer during such year, or January 1 of such year, whichever is the latest. (5) Period or Elapsed Time Less Than One Week . It is the general rule that if wages are paid for a payroll period or other period of less than one week, the tax to be deducted and withheld under the wage bracket method shall be the amount computed for a daily payroll period, or for a miscellaneous payroll period containing the same number of days (including Sundays and holidays) as the payroll period, or other period, for which such wages are paid. In the case of wages paid without regard to any period, if the elapsed time computed in paragraph (4) is less than one week, the same rule is applicable. (6) Rounding Off of Wage Payment . In determining the amount to be deducted and withheld the wage amount shall be computed to the nearest peso, provided such amount is in excess of the highest wage bracket of the applicable table. "Art. 1 (a). If the remuneration paid by an employer to an employee for services performed during one-half or more of any payroll period of not more than thirty-one consecutive days constitutes wages, all the remuneration paid by such employer to such employee for such period shall be deemed to be wages; but if the remuneration paid by an employer to an employee for services performed during more than one-half of any such payroll period does not constitute wages, then none of the remuneration paid by such employer to such employee for such period shall be deemed to be wages." SECTION 8. Included and Excluded Wages . If a portion of the remuneration paid by an employer to his employee for services performed during a payroll period (not exceeding 31 consecutive days) constitutes wages, and the remainder does not constitute wages, all the remuneration paid the employee for services performed during such period shall for purposes of withholding be treated alike, that is, either all included as wages or all excluded. The time during which the employee persons services, the remuneration for which under Article 1(a) constitutes wages, and the time during which he performs services, the remuneration for which under such article does not constitute wages, determine whether all the remuneration for services performed during the payroll period shall be deemed to be included or excluded. If one-half or more of the employee's time in the employ of a particular person in a payroll period is spent in performing services the remuneration for which constitutes wages, then all the remuneration paid the employee for services performed in that payroll period shall be deemed to be wages. If less than one-half of the employee's time in the employ of a particular person in a payroll period is spent in performing services the remuneration for which constitutes wages, then none of the remuneration paid the employees for services performed in that payroll period shall be deemed to be wages. "Art. 2 (e). Personal Exemption . (1) In general. Unless otherwise provided in this supplement, the personal and additional exemptions applicable under this supplement, shall be determined in accordance with the main provisions of this Title. (2) Exemption Certificates . (A) When to be filed. On or the date of the commencement of employment with an employer, or within ten days from the effectivity of this Act in case of persons already employed, the employee shall furnish the employer with a signed withholding exemption certificate relating to the personal and additional exemptions to which he is entitled. (B) Change of Status . In case of change of status of an employee as a result of which he would be entitled to a lesser amount of exemption, the employee shall, within ten days from such change, file with the employer a new withholding exemption certificate reflecting the change. If the change would entitle the employee to a greater amount of exemption, he may furnish the employer with a new withholding exemption certificate reflecting such change. (C) Use of Certificate . The certificates filed hereunder shall be used by the employer in the determination of the amount of taxes to be withheld. (D) Failure to Furnish Certificate . Where an employee, in violation of this supplement, either fails or refuses to file a withholding exemption certificate, the employer shall withhold the taxes prescribed under the schedule for zero exemption of the above withholding tax tables . . ." SECTION 9. Right of Claim Withholding Exemptions . An employee receiving wages shall on any day be entitled to withholding exemptions as provided in the main provisions of Title II. In order to receive the benefit of such exemptions, the employee must file with his employer a withholding exemption certificate. The withholding exemptions to which an employee is entitled on any day depends upon his status as single, married, head of the family and the number of additional exemptions for dependents (i.e. legitimate, recognized natural, or adopted children, in accordance with section 23 of the Code). Each employee may claim the following withholding exemptions in the withholding exemption certificate to be filed with his employer with respect to wages paid on or after January 1, 1959. (1) If single, P1,800. (2) If married or head of family, P3,000. (3) Additional exemption for each dependent, P1,000. The civil status of the employee and the number of dependents must be taken into account in determining the amount of tax to be withheld. The employer is not required to ascertain whether or not the withholding exemptions claimed is greater than the withholding exemptions to which the employee is entitled. If, however, the employer has reason to believe that the withholding exemptions claimed by an employer is greater than the exemptions to which such employee is entitled, the [Collector] COMMISSIONER of Internal Revenue should be so advised. liblex SECTION 10. Withholding Exemption Certificates . Except as hereinafter provided, every employee receiving wages shall furnish his employer a signed withholding exemption certificate on Form W-4, relating to the number of withholding exemptions he claims, which shall in no event exceed the number to which he is entitled. The employer is required to request a withholding exemption certificate from each employee, but if the employee fails to furnish such certificate, such employee shall be considered as claiming no withholding exemptions. Forms of certificate (Form W-4) will be supplied employers upon request from the [Collector] COMMISSIONER of Internal Revenue, [Municipal Treasurer's Office of the Office of the Provincial Revenue Agent] REVENUE DISTRICT OFFICER, or City or Municipal Revenue Collection Agent. In case prescribed forms are not available for any reason, employers shall prepare and use forms substantially identical to the prescribed form and of the same size. The certificates must be retained by the employer as a supporting record of the withholding exemption allowed. Except as hereinafter provided, a withholding exemption certificate shall be furnished the employer by the employee on or before the date of the commencement of employment with the employer, or not later than January 10, 1951 in case of persons already employed. Article 2(e) (2) (B) provides for the filing of new withholding exemption certificates when any change occurs which affects the number of withholding exemptions to which an employee is entitled. If, on any day during the calendar year, such number is more than the number of withholding exemptions claimed by the employee may furnish the employer with a new withholding exemption certificate on which the employee must in no event claim more than the number of withholding exemptions to which he is entitled on such day. If, however, on any day during the calendar year, the number of withholding exemptions to which the employee is entitled is less than the number of withholding exemptions claimed by the employee on the withholding exemption certificate then in effect, the employee must within ten days after the change furnish the employer with a new withholding certificate relating to the number of withholding exemptions which the employee then claims, which must in no event exceed the number to which he is entitled on such day. Rule I. Employee must file an amended certificate reducing the number of exemptions within ten (10) days from such decrease. Rule II. Employee may (but is not required) file an amended certificate increasing the number of exemption at any time. The employer must give effect to a new certificate furnished by the employee with respect to any wages paid after it is furnished. A withholding exemption certificate shall continue in effect with respect to the employee until another such certificate takes effect. The basis of determining the amount of the tax to be withheld by the employer is the exemption certificate filed by the employee. If no withholding exemption certificate is filed, the employer shall determine the tax to be withheld on the basis of the zero exemption. SECTION 11. Supplemental Wage Payments . (a) In general. An employee's remuneration may consist of wages paid for a payroll period and supplemental wages, such as bonuses, commissions, and overtime pay, paid for the same or a different period, or without regard to a particular period. When such supplemental wages are paid (whether or not at the same time as the regular wages) the amount of the tax required to be withheld under the wage bracket method shall be determined as follows: The supplemental wages shall be aggregated with the wages paid for the payroll period, or if not paid concurrently, shall be aggregated with the wages paid for the last preceding payroll period within the same calendar year or the current payroll period, and the amount of tax to be withheld shall be determined as if the aggregate of the supplemental wages and the regular wages constituted a single wage payment for the regular payroll period. (b) Special Rule Where Aggregate Withholding Exemption Exceeds Wages Paid . If supplemental wages are paid to an employee during a calendar year for a period which involves two or more consecutive payroll periods the wages for which are also paid during such calendar year and the aggregate of the wages paid for such payroll periods is less than the aggregate of the amounts determined under section 9 hereof as the withholding exemptions applicable for such payroll periods, the amount of the required to be withheld on the supplemental wages shall be computed as follows: (1) Determine an average wage of each of such payroll periods by dividing the sum of the supplemental wages and the wages paid for such payroll periods by the number of such payroll periods. (2) Determine a tax for each payroll period as if the amount of the average wage constituted the wages paid for such payroll period. (3) From the sum of the taxes computed on the basis of the average wage per payroll period, subtract the sum of the taxes previously withheld for such payroll periods and the remainder, if any, shall constitute the amount of the tax to be withheld upon the supplemental wages. The rules prescribed in this subsection shall, at the election of the employer, be applied in lieu of the rules prescribed in subsection shall not be applicable in any case in which the payroll period of the employee is less than one week. SECTION 12. Wages Paid for Payroll Period of More than One Year . If wages are paid to an employee for a payroll period of more than one year, for the purpose of determining the amount of tax required to be deducted and withheld in respect of such wages, the amount of the tax shall be determined as if such payroll period constituted a miscellaneous payroll period of 365 days. SECTION 13. Wages Paid on Behalf of Two or More Employers . If a payment of wages is made to an employee by an employer through an agent fiduciary, or other person who also has the control, receipt, custody, or pays the wages payable by another employer to such employee, the amount of the tax required to be withheld on each wage payment made through such agent, fiduciary, or person shall, whether the wages are paid separately on behalf of each employer or paid in a lump sum on behalf of all such employers, be determined upon the aggregate amount of such wage payment or payments in the same manner as if such aggregate amount had been paid by one employer. Hence, the tax shall be determined upon the aggregate amount of the wage payment. In any such case, each employer shall be liable for the return and payment of a pro-rata portion of the tax so determined, such portion to be determined in the ratio which the amount contributed by the particular employer bears to the aggregate of such wages. A fiduciary, agent, or other person acting for two or more employers may be authorized to withhold the tax under this supplement with respect to the wages of the employees of such employers. Such fiduciary, agent, or other person may also be authorized to make and file returns of the tax withheld at source on such wages and to furnish the receipts required under this supplement. Applicant for authorization to perform such act should be addressed to the [Collector] COMMISSIONER of Internal Revenue. If such authority is granted by the [Collector] COMMISSIONER of Internal Revenue all provisions of law (including penalties) and regulations prescribed in pursuance of law applicable in respect of an employer shall be applicable to such fiduciary, agent, or other person. However, the employer for whom such fiduciary, agent, or other person acts shall remain subject to all provisions of law (including penalties) and regulations prescribed in pursuance of law applicable in respect of employers. SECTION 14. Wages Paid from Two of More Employers . Where wages are received from two or more employers, the exemption certificate may be filed with the main employer or the employer from whom the employee receives the biggest wages, and the tax to be withheld from the other employers shall be computed under zero exemption; or separate certificates may be filed with employer, in which case each employer will give effect to the exemption certificate on file with him. However, in order to keep his tax currently paid, it may be to the advantage of the employee to file an exemption certificate only with the main employer. "Art. 2(f) Withholding on basis of average wages . The [Collector] COMMISSIONER of Internal Revenue may, under regulations promulgated by the Secretary of Finance, authorize employers (1) to estimate the wages which will be paid to an employee in any quarter of the calendar year, (2) to determine the amount to be deducted and withheld upon each payment of wages to such employee during such quarter as if the appropriate average of the wages so estimated constituted the actual wages, paid, and (3), to deduct and withhold upon any payment of wages to such employee during such quarter such amount as may be required to be deducted and withheld during such quarter without regard to this subarticle ." SECTION 15. Withholding on Basis of Average Wages . The [Collector] COMMISSIONER of Internal Revenue may authorize the employer to withhold the tax under this supplement on the basis of the employee's average estimated wages, with necessary adjustments, for any quarter. Before using such method the employer must receive authorization from the [Collector] COMMISSIONER of Internal Revenue. Applications to use such method must be accompanied by evidence establishing the need for the use of such method. "Art. 2(f) Husband and wife . When a husband and wife each are recipients of wages, whether from the same or from different employers, taxes to be withheld shall be determined on the following basis: (1) The husband shall be deemed the head of the family and proper claimant of the additional exemption in respect to any dependent children; (2) Taxes shall be withheld from the wages of the wife in accordance with the schedule for zero exemption of the withholding tax table in subarticle (a)." SECTION 16. Husband and Wife Both Recipients of Wages . For the purpose of the provisions of the withholding tax on wages when both husband and wife are the recipients of wages either from the same or different employers, in the determination of the tax to be withheld, the husband is deemed to be the head of the family and is entitled to the additional exemptions for the dependent children. From the wages of the wife, the tax is determined by using for her the zero exemption in the withholding tax table. "Art. 2(h) Nonresident aliens . Wages paid to nonresident alien individuals shall not be subject to the provisions of this supplement and shall be governed by the provisions of section fifty-three of this Title. Art. 3. Liability for tax . The employer shall be liable for the payment of the tax required to be deducted and withheld under this supplement, and shall not be liable to any person for the amount of any such payment. Art. 2(b) Tax paid by recipient . If the employer, in violation of the provisions of this supplement, fails to deduct and withhold the tax as required under this supplement, and thereafter the tax against which such tax may be credited is paid, the tax so required to be deducted and withheld shall not be collected from the employer; but this subarticle shall in no case relieve the employer from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withheld." SECTION 17. Liability for the Tax . The employer is required to collect the tax by deducting and withholding the amount thereof from the employee's wages as and when paid, 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. Every person required to deduct and withhold the tax from the wages of an employee is liable for the payment of such tax whether or not is collected from the employee. If, for example, the employer deducts less than the correct amount of tax, or if he fails to deduct any part of the tax, he is nevertheless liable for the correct amount of the tax. However, if the employer in violation of the provisions of the supplement fails to deduct and withhold the tax, and thereafter the income tax against which the tax may be credited is paid, the tax shall not be collected from the employer. Such payment does not, however, operate to relieve the employer from liability for penalties or additions to the tax for failure to deduct and withhold within the time prescribed by law or regulations made in pursuance of law. The employer will not be relieved of his liability for payment of the tax required to be withheld unless he can show that the tax against which the tax under the supplement may be credited has been paid. The amount of any tax withheld and collected by the employer is a special fund in trust for the Government of the Philippines. The employer or other person required to deduct and withhold the tax under this supplement is relieved of liability to any other person for the amount of any such tax withheld and paid to the [Collector] COMMISSIONER of Internal Revenue or to any [provincial, municipal or city treasurer] REVENUE DISTRICT OFFICER, OR CITY OR MUNICIPAL REVENUE COLLECTION AGENT. aisadc Article 8 provides severe penalties for a willful failure to pay, collect, or truthfully account for and pay over, the tax imposed by the supplement, or for a will full attempt in any manner to evade or defeat the tax. Such penalties may be incurred by any person, including the employer, and any officer or employee of a corporate employer, or member or employee of any other employer, who as such employer, officer, employee, or member is under a duty to perform the act in respect of which the violation occurs. "Art. 2(c) Nondeductibility of Tax in Computing Net Income . The tax deducted and withheld under this article shall not be allowed as a deduction either to the employer or to the recipient of the income in computing net income under this Title. Art. 2(d) Refunds or credits . (1) Employer. Where there has been an overpayment of the tax under this article, refund or credit shall be made to the employer only to the extent that the amount of such overpayment was not deducted and withheld hereunder by the employer. (2) Employees . The amount deducted and withheld under this supplement during any calendar year shall be allowed as a credit to the recipient of such income against the tax imposed under the main provisions of this Title. Refunds and credits in cases of excessive withholding shall be granted under rules and regulations promulgated by the Secretary of Finance." SECTION 18. Nondeductibility of Tax and Credit for Tax Withheld . The tax deducted and withheld at the source upon wages shall not be allowed as a deduction either to the employer or the recipient of the income in computing net income under Title II of the National Internal Revenue Code. The entire amount of the wages from which the tax is withheld shall be included in gross income in the return required to be made by the recipient of the income without deduction for such tax. The tax withheld at source, however, is allowable as a credit against the tax imposed by the main provisions of Title II upon the recipient of the income. Any excess of the tax withheld at source over the tax ascertained to be due on the income tax return upon office audit in the Bureau of Internal Revenue shall be refunded or credited, at his option, to the recipient of the income. Such refund or credit shall be without prejudice to whatever adjustments may be proper after field investigation or upon information relative to the taxpayer's income tax liability under the main provisions of Title II. 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. For the purpose of the credit, the recipient of the income is the person subject to tax imposed under the main provisions of Title II upon wages from which the tax was withheld. "Art. 4. Return and payment to the government of taxes withheld . Taxes deducted and withheld hereunder by the employer on wages of employees shall be covered by a return and paid to the [treasurer of the province, city or municipality] REVENUE DISTRICT OFFICER, OR CITY OR MUNICIPAL REVENUE COLLECTION AGENT in which the employer has his legal residence or principal place of business, or, in case the employer is a corporation, in which the principal office is located. The return shall be filed and the payment made within twenty-five (25) days from the close of each calendar quarter. The taxes deducted and withheld by employers shall be held in a special fund in trust for the Government until the same are paid to the said collecting officers. The [Collector] COMMISSIONER of Internal Revenue may, with the approval of the Secretary of Finance, require employers to pay or deposit the taxes deducted and withheld at more frequent intervals, in cases where such requirement is deemed necessary to protect the interest of the Government." "Art. 5. Return and payment in case of Government employees . If the employer is the Government of the Philippines, or any political subdivision, agency or instrumentality thereof, the return of the amount deducted and withheld upon any wages shall be made by the officer or employee having control of the payment of such wages, or by any officer or employee duly designated for that purpose." SECTION 19. Return [and payment] of Income Tax Withheld on Wages . (a) QUARTERLY RETURN. Every person required, under the provisions of [the supplement] SECTION 25 of THESE REGULATIONS, to [deduct and withhold the tax on wages] REGISTER AS AN EMPLOYER shall make a return [and pay such tax] on or before the 25th day of the month following the close of each calendar quarter ending March 31, June 30, September 30, and December 31. Such return [is to] SHALL be made on Form W-1 (Return of Income Tax Withheld on Wages) and must be filed with the [Collector] COMMISSIONER of Internal Revenue, or the [Treasurer of] INTERNAL REVENUE COLLECTION AGENT in the city, [province,] or municipality [in which is located] WHERE the principal place of business or office [of the employer or in which is located his], or legal residence OF THE EMPLOYER IS LOCATED. [There shall be included with the return filed for the fourth quarter of the calendar year or with the employer's final return, if filed at an earlier date, the triplicate of each withholding tax receipt (Form W-2a) furnished the employees]. THE RETURN SHALL COVER THE AGGREGATE AMOUNT OF TAXES WITHHELD DURING THE CALENDAR QUARTER. IF NO TAX HAS BEEN WITHHELD ON WAGES PAID DURING A QUARTER, THE EMPLOYER SHALL NEVERTHELESS FILE A RETURN ON FORM W-1 FOR THAT QUARTER. IN THIS CASE, THE STATEMENT "NO TAX WITHHELD" OR "EXEMPT", AS THE CASE MAY BE, OR OTHER WORDS OF SIMILAR IMPORT SHALL BE ENTERED ON THE FORM W-1. EXCEPT IN THE CASE OF QUARTERLY ADJUSTMENTS, AS EXPLAINED ELSEWHERE IN THESE REGULATIONS, A RETURN ON FORM W-1 MAY NOT BE MADE FOR MORE THAN ONE CALENDAR QUARTER OF THE YEAR, NOR MAY A PORTION OF ONE CALENDAR QUARTER BE INCLUDED WITH A PORTION OF ANOTHER CALENDAR QUARTER IN A SINGLE RETURN ON FORM W-1 EVEN THOUGH THE ENTIRE PERIOD DOES NOT EXCEED THREE MONTHS. [The triplicate Forms W-2a, when filed with the office of the Collector of Internal Revenue or office of the provincial, municipal or city treasurer, must be accompanied by Form W-3 and an alphabetical list showing names of employees, total salary (before withholding) paid to each employee during the year, total taxes withheld during the year from such salary, and number of withholding exemptions of each employee. The column for taxes withheld should be totalled (preferably supported by an adding machine tape), which total should agree with that shown on Form W-3. If an employer's total payroll consists of a number of separate units or establishments, the triplicate Form W-2a may be assembled accordingly and a separate list submitted for each unit. In such case, a summary alphabetical list should be submitted. Where the number of triplicate receipts is large, they may be forwarded in packages of convenient size. When this is done, the packages should be identified with the name of the employer and consecutively numbered and Form W-3 should be placed in package No. 1. The number of packages should be indicated immediately after the employer's name on Form W-3. The tax return, Form W-1, and remittance in cases of this kind should be filed in the usual manner, accompanied by a brief-statement that Form W-2a and W-3 are in separate packages]. [Every person required to withhold and pay any tax under this supplement shall keep such records as will indicate the names and address of the persons employed during the year payments to whom are subject to withholding, the periods of employment, and the amounts and dates of payment to such persons. No specific form for such records has been prescribed. Such records shall be kept at all times available for inspection by internal revenue officers] The return must be signed by the employer or other person required to withhold and pay the tax and shall contain or be verified by a written declaration that it is made under the penalties of perjury. If the person required to withhold and pay the tax under this supplement is a corporation, the return shall be made in the name of the corporation and shall be signed and verified by the president, vice-president, or other principal officer. With respect to any tax required to be withheld under this supplement by a fiduciary, the return shall be made in the name of the individual, estate, or trust for which such fiduciary acts, and shall be signed and verified by such fiduciary. In the case of two or more joint fiduciaries the return shall be signed and verified by one of such fiduciaries. If the Government of the Philippine, its political subdivision or any agency or instrumentality, is the employer, the return of the tax may be made by the officer or employee having control of payment of wages or other officer or employee appropriately designated for that purpose. Pre-addressed form W-1 mailed by the [Collector] COMMISSIONER of Internal Revenue to employers should be used in filing returns. If the pre-addressed form is lost, a new one should be requested if sufficient time remains before the filing date. Should it be necessary to use a blank form not pre-addressed, care should be exercised to show the employer's name exactly as it appeared on previous returns. [Except in the case of quarterly adjustments, as explained elsewhere in these regulations, a return on Form W-1 may not be made for more than one calendar quarter of the year, nor may a portion of one calendar quarter be included with a portion of another calendar quarter in a single return on Form W-1 even though the entire period does not exceed three months]. (b) ANNUAL RETURNS . EVERY EMPLOYER WHO UNDER THE PROVISIONS OF THE SUPPLEMENT, HAS DEDUCTED AND WITHHELD TAXES ON WAGES PAID SHALL, ON OR BEFORE JANUARY THIRTY-FIRST OF THE SUCCEEDING YEAR, SUBMIT FURTHER TO THE COMMISSIONER OF INTERNAL REVENUE A RETURN OF THE TOTAL AMOUNT WITHHELD AND REMITTED DURING THE YEAR. SUCH RETURN SHALL BE MADE ON FORM W-3 (RECONCILIATION OF QUARTERLY RETURNS OF INCOME TAX WITHHELD ON WAGES) AND MUST BE ACCOMPANIED BY AN ALPHABETICAL LIST SHOWING THE NAMES OF EMPLOYEES FROM WHOM TAXES HAVE BEEN WITHHELD, TOTAL WAGES (BEFORE WITHHOLDING) PAID TO EACH EMPLOYEE DURING THE YEAR, TOTAL TAXES WITHHELD DURING THE YEAR FROM SUCH WAGES, AND NUMBER OF WITHHOLDING EXEMPTIONS OF EACH EMPLOYEE. THE COLUMN FOR TAXES WITHHELD SHOULD BE TOTALLED (PREFERABLY SUPPORTED BY AN ADDING MACHINE TAPE), WHICH TOTAL SHOULD AGREE WITH THAT SHOWN ON FORM W-3. IF AN EMPLOYER'S TOTAL PAYROLL CONSISTS OF A NUMBER OF SEPARATE UNITS OR ESTABLISHMENTS, A SUMMARY ALPHABETICAL LIST SHOULD BE SUBMITTED. cdta (c) KEEPING OF RECORDS . EVERY PERSON REQUIRED TO REGISTER AS AN EMPLOYER UNDER THE PROVISIONS OF SECTION 25 OF THESE REGULATIONS SHALL KEEP SUCH RECORDS AS WILL INDICATE THE NAMES AND ADDRESSES OF THE PERSONS EMPLOYED DURING THE YEAR PAYMENT TO WHOM ARE SUBJECT TO WITHHOLDING, THE PERIODS OF EMPLOYMENT, AND THE AMOUNTS AND DATES OF PAYMENT TO SUCH PERSONS. NO SPECIFIC FORM FOR SUCH RECORDS HAS BEEN PRESCRIBED. SUCH RECORDS SHALL BE KEPT AT ALL TIMES AVAILABLE FOR INSPECTION BY INTERNAL REVENUE OFFICERS. SECTION 20. Final Returns . The last return on Form W-1 for any employer required to withhold and pay any tax under this supplement, who during the calendar year either goes out of business or otherwise ceases to pay wages, shall be marked "final return" by such employer. Such final return shall be filed with the office of the [Collector] COMMISSIONER of Internal Revenue, or [provincial, municipal and city treasurer's office] CITY OR MUNICIPAL REVENUE COLLECTION AGENT within 25 days after the date on which the final payment of wages is made for services performed for such employer, and shall plainly show the period covered and also the date of the last payment of wages. There shall be executed as part of each final return a statement giving the address at which the records required by this section will be kept, the name of the person keeping such records, and, if the business has been sold or otherwise transferred to another person, the name and address of such person and the date on which such sale or other transfer took effect. If no such sale or transfer occurred or the employer does not know the name of the person to whom the business was sold or transferred, that fact should be included in the statement. An employer who has only temporarily ceased to pay wages, including an employer engaged in seasonal activities, shall continue to file returns, but shall enter on the face of any return on which no tax is required to be reported a statement showing the date of the last payment of wages and the date when he expects to resume paying wages. SECTION 21. Use of Prescribed Forms . Copies of the prescribed forms will so far as possible be regularly furnished employers without application therefor. An employer will not be excused from making the return, however, by the fact that no return form has been furnished to him. Employers not supplied with the proper forms should make application therefor to the [Collector] COMMISSIONER of Internal Revenue in ample time to have their returns prepared, verified, and filed with the [Collector] COMMISSIONER of Internal Revenue or the [provincial, municipal, or city treasurer's office] CITY OR MUNICIPAL REVENUE COLLECTION AGENT on or before the due date. If the prescribed form is not available, a statement made by the employer disclosing the amount of taxes due may be accepted as a tentative return. If filed within the prescribed time the statement so made will relieve the employer from liability for the addition to tax imposed for the delinquent filing of the return this supplement, provided that without unnecessary delay such tentative return is supplemented by a return made on the proper form. SECTION 22. [Requirement for Advance Deposit of Withheld Taxes to the Amount of P200 . 00] PAYMENT OF TAXES WITHHELD ON WAGES . (a) IN GENERAL. EVERY PERSON REQUIRED TO DEDUCT AND WITHHOLD THE TAX ON WAGES SHALL PAY SUCH TAX ON OR BEFORE THE 25th DAY OF THE MONTH FOLLOWING THE CLOSE OF EACH CALENDAR QUARTER ENDING MARCH 31, JUNE 30, SEPTEMBER 30, AND DECEMBER 31. (b) REQUIREMENT FOR ADVANCE PAYMENT . [It shall be the duty of] Every employer who withheld taxes of P200 or more during the month [to] SHALL PAY within ten (10) days after the close of the calendar month to the [provincial, municipal or city treasurer or to the Collector] COMMISSIONER OF INTERNAL REVENUE, OR TO THE CITY OR MUNICIPAL REVENUE COLLECTION AGENT all funds withheld as taxes during that calendar month [on or before the 25th day of the month following the close of each quarter of each calendar year, every employer shall make a return on Form W-1 to the Collector of Internal Revenue or to the provincial, municipal or city treasurer, covering the aggregate amount of taxes withheld during that quarter, and attach to such return, as payment for the taxes shown thereon, receipts issued to them by such provincial, municipal or city treasurer or by the Collector of Internal Revenue evidencing the payment of funds withheld as taxes], provided, however, that taxes withheld during the last month of the quarter by the employer may be remitted to the [Collector] COMMISSIONER of Internal Revenue or [to the provincial, municipal or city treasurer] CITY OR MUNICIPAL REVENUE COLLECTION AGENT, together with the quarterly return (FORM W-1), [i.e.] not later than the 25th day from the close of the quarter. (c) PRESENTATION OF RECEIPTS . IT SHALL BE THE DUTY OF EVERY EMPLOYER WHO, PURSUANT TO THE PROVISIONS OF THE PRECEDING PARAGRAPH, HAS MADE MONTHLY REMITTANCES OF TAXES WITHHELD, TO PRESENT TO THE COMMISSIONER OF INTERNAL REVENUE, OR TO THE CITY OR MUNICIPAL REVENUE COLLECTION AGENT, AT THE TIME THE FORM W-1 FOR THE CALENDAR QUARTER IS FILED, THE RECEIPTS ISSUED BY SUCH CITY OR MUNICIPAL REVENUE COLLECTION AGENT, OR BY THE COMMISSIONER OF INTERNAL REVENUE, EVIDENCING THE ADVANCE PAYMENTS OF TAXES WITHHELD DURING THAT CALENDAR QUARTER. "Art. 6. Statements and returns . (a) Requirement . Every employer required to deduct and withhold a tax in respect of the wages of an employee shall furnish to each such employee in respect of his employment during the calendar year, on or before January thirty-first of the succeeding year, or, if his employment is terminated before the close of such calendar year, on the day on which the last payment of wages is made, a written statement showing the wages paid by the employer to such employee during the calendar year, and the amount of the tax deducted and withheld under this supplement in respect of such wages. The statement required to be furnished by this article in respect of any wages shall be furnished at such other times, shall contain such other information, and shall be in such form as the Secretary of Finance may by regulations prescribe. (b) Returns . Every employer required to deduct and withhold the taxes in respect of the wages of his employees shall, on or before January thirty-first of the succeeding year, submit to the Collector of Internal Revenue a return of the total amount withheld during the year accompanied by copies of the statements referred to in the preceding paragraph. This return, if made and filed in accordance with regulations promulgated by the Secretary of Finance shall be sufficient compliance with the requirements of section seventy-seven of this Title in respect of such wages. (c) Extension of time . The Collector of Internal Revenue, under such regulations as may be promulgated by the Secretary of Finance, may grant to any employer a reasonable extension of time to furnish and submit the statements and returns required under the article." SECTION 23. Receipts for Tax Withheld at Source on Wages . (a) In general. Every employer or other person required to deduct and withhold the tax shall furnish at the end of each quarter to every employee from whose wages taxes have been withheld a receipt showing the total wages paid during the quarter and the amount of taxes withheld from such wages. At the end of the calendar year, the employer shall furnish each employee the original and duplicate of Form W-2 showing the name and address of the employer, the name and address of the employee, the wages paid and the amount of the tax withheld during the calendar year. Such receipt on Form W-2 shall not show remuneration which does not constitute wages within the meaning of Article 1 (a). Receipts prepared in substantially like form and size as Form W-2 will be acceptable if approved by the [Collector] COMMISSIONER of Internal Revenue. The statement on Form W-2 shall be furnished to the employee on or before January 31 of the succeeding calendar year, or if his employment is terminated before the close of such calendar year, on the day on which the last payment of wages is made. (b) Extension of Time for Furnishing Statements to Employees . An extension of time, not exceeding 30 days, within which to furnish the withholding receipt (Form W-2) required by Article 6(a) upon termination of employment is hereby granted to any employer with respect to any employee whose employment is terminated during the calendar year. In the case of intermittent or interrupted employment where there is reasonable expectation on the part of both employer and employee of further employment, there is no requirement that a withholding receipt be immediately furnished the employee; but when such expectation ceases to exist, the statement must be furnished within 30 days. The extension mentioned under this section refers to extension of time for furnishing the employee the withholding receipt (Form W-2) upon termination of employment. (c) Information return at source as to payments of one thousand-eight hundred pesos . The making of information returns as to payments of more than P1,800 required under section 77 of the National Internal Revenue Code, as amended, will not be required with respect to any wages from which the tax has been withheld, provided the [triplicates of the withholding receipts (Form W-2a)] Form W-3 and the alphabetical list mentioned in Section [19] 19 (b) hereof are submitted [with the last quarterly return (Form W-1) for the year]. SECTION 24. Quarterly Adjustments . (a) In general. If, for any quarter of the calendar year, more or less than the correct amount of the tax is withheld, or more or less than the correct amount of the tax is paid to the [Collector] COMMISSIONER of Internal Revenue, or to the [provincial, municipal, or city treasurer] CITY OR MUNICIPAL REVENUE COLLECTION AGENT, proper adjustment, without interest, may be made in any subsequent quarter of the same calendar year. No adjustment shall, however, be made under the provisions of this section in respect of an underpayment for any quarter after receipt from the [Collector] COMMISSIONER of Internal Revenue of notice and demand for payment thereof based upon assessment, but the amount shall be paid in accordance with such notice and demand; nor shall any adjustment under the provisions of this section be made in respect of an overpayment for any quarter after the filing of a claim for refund thereof. Every return on which an adjustment for a preceding quarter is reported must have securely attached as part thereof a statement explaining the adjustment, and designating the quarterly return period in which the error occurred. If an adjustment of an overcollection of tax which the employer has repaid to an employee is reported on a return, such statement shall include the fact that such tax was repaid to the employee. (b) Less than Correct Amount of Tax Withheld . If none or less than the correct amount, of the tax is deducted form any wage payment and the error is ascertained prior to the making of the return on Form W-1 for the quarter in which such wages are paid, the employer shall nevertheless report on such return and pay to the collector [or treasurer's] office the amount of the tax required to be withheld. If the error is not ascertained until after the making of the return on Form W-1 for the quarter in which such wages are paid, the undercollection adjusted in accordance with this subsection shall be paid to the collector without interest, at the time prescribed for payment of the tax for the quarter in which such adjustment is made. If an adjustment is made pursuant to this subsection but the amount thereof is not paid when due, interest thereafter accrues. If none, or less than the correct amount, of the tax is withheld from any wage payment, the employer may correct the error by deducting the amount of the under-collection from remuneration of the employee, if any, under his control after he ascertains the error. Such deduction may be made even though the remuneration, for any reason, does not constitute wages. The obligation of an employee to the employer with respect to an undercollection of tax from the employee's wages not subsequently corrected by a deduction made as prescribed herein is a matter for settlement between the employee and the employer. (c) More than Correct Amount of Tax Withheld . If, in any quarter, more than the correct amount of tax is deducted from any wage payment, the overcollection may be repaid to the employee in any quarter of the same calendar year. If the amount of the overcollection is repaid, the employer shall obtain and keep as part of his records the written receipt of the employee showing the date and amount of the re-payment. If an overcollection in any quarter is repaid and receipted for by the employee prior to the time the return on Form W-1 for such quarter is filed with the collecting officer, the amount of such overcollection shall not be included in the return for such quarter. Subject to the limitations provided in subsection (a), if an overcollection in any quarter is repaid and receipted for by the employee after the time the return on Form W-1 for such quarter is filed and the tax is paid to the collecting officer, the overcollection may be corrected by an adjustment on the return for any subsequent quarter of the same calendar year. liblex Every overcollection not repaid and receipted for by the employee as provided in this subsection must be reported and paid with the return on Form W-1 for the quarter in which the overcollection is made. For information as to the manner of correcting errors in withholding which cannot be adjusted in a return for a subsequent quarter of the same calendar year, employers should consult the [Collector] COMMISSIONER of Internal Revenue. SECTION 26. Advance Information Required of Employers . All employers who make payment during the year 1950 or expect to make payment during 1951 of wages of P1,800 or more a year (or P150 monthly, P75 semi-monthly etc.), to any single employee, shall, on or before January 10, 1951, submit to the [Collector] COMMISSIONER of Internal Revenue a statement containing the following particulars: Name:__________________________________________________ Address:_________________________________________________ Kind of business: ___________________________________________ Number of employee receiving P1,800 or more annually:____________ New employers shall submit the above statement within ten (10) days after they acquire the status of employer, and they shall not commence payment of wages until such statement has been submitted. The said statements will be used in the preparation of lists or registers of employers. "Art. 7. Surcharges for failure to render returns and for rendering false or fraudulent returns ; delinquency in payment of taxes . The surcharges prescribed in section seventy-two of this Title in cases of failure to render returns and for filing false or fraudulent returns shall apply to the returns required under Articles four and five. In case of the taxes deducted and withheld by the employer are not paid within the time prescribed, there shall be added a surcharge of five per centum on the amount of tax unpaid and interest at the rate of one per centum a month upon the amount required to be paid from the time the same became due until paid. " Surcharge for failure to render and for rendering false and fraudulent returns . The Collector of Internal Revenue shall assess all income taxes. In case of willful neglect to file the return or list within the time prescribed by law or in a case a false or fraudulent return or list is willfully made, the Collector of Internal Revenue shall add to the tax or to the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum of the amount of such tax on deficiency tax. In case of any failure to make and file a return or list within the time prescribed by law or by the Collector or other internal-revenue officer, not due to willful neglect, the Collector of Internal Revenue shall add to the tax twenty-five per centum of its amount except that, when a return is voluntarily and without notice from the Collector or other officer filed after such time, and it is shown that the failure to file was due to a reasonable cause, no such addition shall be made to the tax. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax." (Section 72, Chapter IX, Title II, Commonwealth Act No. 466) "Art. 8. Penalties . (a) Penalties for failure to file, and for filing fraudulent returns or statements. Any person who willfully renders or furnishes a false or fraudulent return or statement required under the provisions of articles four five and six or under regulations promulgated by the Secretary of Finance, or who willfully fails to render or furnish a statement as required in this supplement shall upon conviction, for each such act or omission, be fined not less than one thousand pesos nor more than two thousand pesos and imprisoned for not more than one year. (b) Penalties in respect of withholding exemption certificates . Any individual required to supply information who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under article two, shall, in lieu of any penalty otherwise provided, upon conviction be fined not more than one thousand pesos or imprisoned for not more than one year, or both. The same penalty shall apply to an employer who willfully accepts as a fact or as true information which would reduce the tax to be withheld under article two hereof. (c) Penalties on corporate officers . The penalties prescribed in this article shall, in the case of an employer which is a corporation, partnership, or association, be imposed on the president, manager, treasurer, or other persons responsible for the particular act or omission." "Art. 9. Verification of returns, etc . (a) Power of Collector of Internal Revenue to require. The Collector of Internal Revenue, under regulations promulgated by the Secretary of Finance, may require that any return, statement, or other document required to be filed under this supplement, or under regulations promulgated by the Secretary of Finance, shall contain or be verified by a written declaration that it is made under the penalties of perjury, and such declaration shall be in lieu of any oath otherwise required." "(b) Penalties . Every person who willfully makes and subscribes any return, statement, or other document which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter, shall be guilty of a felony, and, upon conviction shall be subject to the penalties prescribed for perjury under the Revised Penal Code." SECTION 26. Penalties for False Returns . Subarticle (b) of Article 9 provides for penalties in the case of any person who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter. Such person shall be guilty of a felony, and upon conviction, shall be subject to the penalties prescribed for perjury under the provisions of the Revised Penal Code. " Payment with backpay certificate . When an employee is entitled to a backpay under the provisions of Republic Act Numbered Three Hundred and Four, the amount of income tax withheld under this Act shall, if he elects to pay his annual income tax with his backpay, be refunded to him unless the backpay being negotiated is insufficient to cover his tax liability, in which case only the excess of the total of the amount withheld and the amount of such backpay rights being negotiated, over this total income tax liability shall be refunded." (Section 15, Republic Act No. 590) Effective date . This Act shall apply to income received from January first, nineteen hundred and fifty except section 12 hereof which shall take effect on January 1, 1951: Provided, however, That unless otherwise expressly extended by Congress, the increased taxes provided for in this Act shall continue in force and effect only until December thirty first, nineteen hundred and fifty two, after which period the actual rates of taxes shall again be in force. SECTION 27. Applicability ; Constructive Receipt of Wages . The withholding tax on wages shall apply on wages paid on or after January 1, 1951, regardless of when such wages were earned. Thus, if an employee is paid wages on January 1, 1951 for services performed during the calendar year 1950 or any preceding year, the withholding provisions of Supplement A and these regulations shall apply. Wages are constructively paid within the meaning of these regulations when they are credited to the account of or set apart for an employee so that they may be drawn upon by him at any time although not than actually reduced to possession. To constitute payment in such a case the wages must be credited or set apart to the employee without any substantial limitation or restriction as to time or manner of payment or condition upon which payment is to be made, and must be made available to him so that they may be drawn upon at any time, and their payment brought within his control and disposition. SECTION 28. Effectivity . These regulations shall take effect upon their promulgation in the Official Gazette. cdll EDUARDO Z. ROMUALDEZ Secretary of Finance Recommended by: MISAEL P. VERA Commissioner of Internal Revenue