Regarding the Philippine withholding tax certificate (BIR Form 2316)

The Philippine BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld, CCPTW) is equivalent to a withholding tax certificate in Japan. It summarizes an employee’s total income, deductions, and, if applicable, the total withheld income tax.
This section delves into the details of BIR Form 2316, its purpose, and its significance for both employers and employees.

Purpose and Relevance of BIR Form 2316

BIR Form 2316 provides a summary of an employee’s compensation income, withheld taxes, and other relevant information for a specific year. It promotes transparency for both the company and the employee and supports taxpayer compliance with tax laws.

Its importance is highlighted in the following points:

• Proof of Income: Serves as a record of the compensation income an employee received from a specific employer during the year.
• Tax Compliance: Shows the exact amount of taxes withheld by the employer, facilitating the calculation of the employee’s annual income tax liability.

Components of BIR Form 2316

The information included in BIR Form 2316 is as follows:

• Employee and Employer Information: Includes the names, addresses, and Tax Identification Numbers (TINs) of both the employee and the employer.
• Compensation Income: Records the employee’s total annual compensation income, including basic salary, allowances, bonuses, commissions, and other related remuneration.
• Non-Taxable/Exempt Income: Accounts for income not subject to tax, such as the basic pay of minimum-wage earners, holiday pay, overtime pay, night differential, non-taxable allowances (up to PHP 90,000), and other exempt compensation.
• Withheld Taxes: Shows the total taxes withheld by the employer from the employee’s compensation income.
• Other Required Items: Signature sections for both employer and employee certify that the information is prepared and verified in good faith, true and correct to the best of their knowledge, and that they consent to the processing of information under the Data Privacy Act of 2012. Signatures are also used for substitute filing: if the employee received compensation from only one employer during the year and the employer correctly withheld taxes, this serves as a substitute for the individual income tax return (BIR Form 1700).

Employer Responsibilities

The employer’s responsibilities related to BIR Form 2316 are defined as follows:

• Accuracy and Completeness: The employer is responsible for ensuring that the information on the form accurately reflects the employee’s compensation, withheld taxes, and other relevant details.
• Issuance of the Form: The employer must provide a copy of BIR Form 2316 to each employee by January 31 of the following year, unless the employee has separated before the end of the year. In the case of employee separation, the form must be provided with the final paycheck.
• Submission: The employer must submit BIR Form 2316 along with the Alphalist (a summary of information related to income tax withholding) to the BIR by February 28 of the following year.

Employee Responsibilities

The employee’s responsibilities related to BIR Form 2316 are defined as follows:

• Verification: The employee must carefully review the entire form and ensure that the compensation income, withheld taxes, and exemptions are accurately reflected.
• Record Keeping: The employee should retain copies of BIR Form 2316 and other relevant tax documents for future reference, tax audits, and personal applications with banks or other institutions.

As described above, BIR Form 2316 is an important document that enables accurate income tax calculation and compliance for both employers and employees. Employers are required to provide this form to employees as proof of their annual income. By understanding the purpose, content, and associated responsibilities of BIR Form 2316, transparency regarding employees’ compensation, smooth tax procedures, and adherence to tax laws can be ensured.

Our company also provides support for payroll processing and related tax filings. Please feel free to contact us.