PLEASE NOTE: This article was updated on 2 March 2020 to take into account the deadline extension for the filing of BIR Form 2316. Please also note that BIR rules and timelines may change from the below or be extended at any time in light of COVID-19.
Employers in the Philippines must submit BIR Form 2316 in relation to each employee every calendar year.
This year, it must be submitted by 31 March! That’s just 4 weeks away….
If your company hasn’t started preparing this filing, it’s advisable to start without delay! There is a lot of information to collate and complete. You also have to liaise with each individual employee. In addition, the employer must ensure that all information, particularly in relation to the amount of tax withheld, is accurate!
To help you prepare for the filing of BIR Form 2316, we have outlined below all you need to know!
- 1 What is BIR Form 2316?
- 2 Why is BIR Form 2316 important?
- 3 Recent Changes – TRAIN law
- 4 When does BIR Form 2316 have to be filed?
- 5 Who files BIR Form 2316 – the employer or the employee?
- 6 What if an employee is terminated during a calendar year?
- 7 What kind of information needs to be included in BIR Form 2316?
- 8 Preparing for the submission of BIR Form 2316
- 9 CloudCfo – File on time, every time!
What is BIR Form 2316?
BIR Form 2316, or to give it its full name, the Certificate of Compensation Payment/Tax Withheld, is a form that must be filed with the Bureau of Internal Revenue, or the BIR, by employers in the Philippines every calendar year.
BIR Form 2316 is completed and issued to each employee that receives a salary, wage or any other form of remuneration from the employer. The Certificate should identify the total amount of compensation paid to, and the total taxes withheld from, each employee during the previous calendar year.
Why is BIR Form 2316 important?
BIR Form 2316 is important for a number of reasons.
It serves the purpose of ensuring that employees have clarity on the amount of tax that has been withheld from them in a particular year.
It is also a mechanism for the BIR to monitor employer taxpayers and ensure that the employer has actually submitted the tax withheld to the BIR for the relevant year!
BIR Form 2316 is also important when employees are changing employers. When an employee moves from one employer to another employer in the same calendar year, the new employer will generally request the BIR Form 2316 that the employee should have received from the previous employer. This is to clarify what taxes have been withheld already from the employee and consolidate this with withholding tax requirements under the new employer.
Recent Changes – TRAIN law
Revenue Memorandum Circular 100-2019 was issued by the BIR in September 2019. The purpose of RMC 100-19 was to introduce amendments and updates to BIR Form 2316. These amendments were due to the introduction of Republic Act (RA) No. 10963, commonly known as the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Why was BIR Form 2316 revised? The main reason was to make changes to required information fields for certain exemptions and qualified dependents.
So if you are an employer, make sure you are using the correct version of BIR Form 2316, which can be found here. The correct version should say “January 2018 (ENCS)” in the top left corner. The form can also be completed using the BIR’s online module. However, at present, the module version has not yet been updated on the BIR website and is not available.
When does BIR Form 2316 have to be filed?
BIR Form 2316 must be issued to all employees for signing before January 31 of the calendar year following the year in which the compensation was paid to employees.
In 2020, the deadline for filing BIR Form 2316 with the BIR was originally 28 February. We understand that this was to give the BIR time to update the version of its online module for completion of BIR Form 2316.
The deadline for filing BIR Form 2316 has now been extended further – the new filing deadline is 31 March 2020. This extension was confirmed through Revenue Memorandum Circular No. 17 2020, which was issued on 26 February 2020.
For more information on upcoming filing and compliance requirements in the Philippines, check out our March Tax Calendar.
Who files BIR Form 2316 – the employer or the employee?
While both the employer and the employee are required to sign the form, the onus is ultimately on the employer to file BIR Form 2316 with the BIR.
The employer must file 3 original copies with the BIR – one for the BIR, one for the employer and then one for the employee.
What if an employee is terminated during a calendar year?
If an employee is terminated or resigns during a calendar year, they won’t be with that same employer when the time comes for the employer to file BIR Form 2316.
In cases where the employee has been terminated or has resigned himself/herself, BIR Form 2316 should be issued to that employee at the same time as they receive their final wages/salary.
As mentioned above, this is important as new employers will generally request the form when onboarding new employees that have had a previous employer within the same calendar year. The new employer can then use this form to understand the tax position of the new employee and consolidate for withholding tax purposes.
What kind of information needs to be included in BIR Form 2316?
Amongst other details, the employer is required to input the total amount of compensation paid to each employee during the previous calendar year as well as the relevant taxes that were withheld from the employee during that same calendar year. Here are some of the primary details for inclusion in BIR Form 2316. For the full list, click here.
- Employee Details – The relevant details of each employee needs to be inserted. This includes the employee’s name, Tax Identification Number or TIN, address, date of birth, contact number, salary, etc.
- Employer Details – Much of this information can be found on the company’s BIR Form 2303, commonly known as the Certificate of Registration (COR). Check out our recent article on everything you need to know about BIR Form 2303.
- Total compensation paid – This requires a computation of the total amount of compensation paid by the employer to a particular employee during the previous calendar year.
- Total tax withheld – This requires a computation of the total amount of tax withheld from the employee during that same year.
- Non-Taxable/Exempt Compensation Income – Examples might include de minimis benefits, SSS, Philhealth, Pag-IBIG, etc.
Preparing for the submission of BIR Form 2316
So what actually needs to be done in order to prepare and file BIR Form 2316 by the filing deadline? Remember, the filing date for this year is now 31 March….!
Preparation should start as early as the start of the relevant calendar year. A business should ensure that, throughout the year, it is complying with all tax filings, compliance requirements and employee payments. In addition, the business should also make sure that these transactions are being recorded properly in the book of accounts. So the first real step of preparation should be implementing proper processes and controls to ensure that the correct amount of taxes are withheld, all employees are registered and all payments are recorded. Whether you use an in-house accountant, payroll solution or an outsourced provider for accounting services in the Philippines, this is a key requirement!
Then, when completing BIR Form 2316, the employer should ensure that it inputs the correct information for each employee. This can be a quick and simple task if the employer only has 5 or 10 employees. However, if the company has 100s or 1,000s of employees, this is a much bigger undertaking!
The employer must sign and file a BIR Form 2316 for every single employee. Each employee must also sign their respective form! So if a company has 200 employees, that’s a lot of BIR Form 2316s! Further, the BIR requires the submission of 3 original signed BIR Form 2316s for each employee. So if an employer has 200 employees, that’s 600 BIR Form 2316s that have to be signed and submitted!
Once the 3 original BIR Form 2316s are filed with the BIR for each employee, the BIR will keep one copy, the employer will keep another copy and each employee will be issued their own copy.
Then the employer has to do it all over again the following year!
CloudCfo – File on time, every time!
Our CloudCfo team are experts on assisting businesses in the Philippines on their tax filing and compliance requirements.
We ensure our clients avoid financial penalties and achieve full compliance by helping them to file on time, every time!
We offer payroll services as an addition to our core outsourced accounting, bookkeeping and finance services. By engaging CloudCfo, you can be confident that when the times come to compute the information for your BIR Form 2316, the information will be ready, accessible and most important, accurate!
Visit us at cloudcfo.ph or contact us at firstname.lastname@example.org for more information about how we can help your business grow!