Employers in the Philippines must understand the withholding tax framework that applies to employee compensation payments in the Philippines.
In previous articles, we highlighted the obligations on employers in the Philippines to apply withholding tax on employee compensation.
We have also previously explored some other employee contributions and deductions that employers in the Philippines need to know.
In this article, however, we examine BIR Form 1604-C – an annual tax return that must be filed by employers in the Philippines which outlines the tax on compensation withheld from employees during the previous tax year.
What is BIR Form 1604-C?
BIR Form No. 1604-C is the Annual Information Return of Income Taxes Withheld on Compensation.
In the Philippines, employers are required to compute, deduct and withhold part of the value of an employee’s compensation before it is paid to employees.
Employers are required to file monthly withholding tax on compensation returns to the BIR through the completion of BIR Form 1601-C and then remit the relevant tax payments to the BIR. BIR Form 1601-C should include the compensation tax withheld from all employees during the previous month.
At the end of each year, employers are required to submit an annual report to the BIR which summarizes the total amount of income tax withheld on compensation from employees during the previous year. The method of filing this annual return is via BIR Form 1604-C.
How to compute Withholding Tax on Compensation?
The computation of withholding tax on compensation in the Philippines is performed using various rates depending on the compensation and status of an employee.
Feel free to check out our previous article Employers in the Philippines – Withholding Tax on Compensation Explained! to understand how withholding tax on compensation is computed in the Philippines!
You can also refer to the BIR’s Withholding Tax Table for compensation tax rates which is available on the BIR website.
Who is required to file BIR Form 1604-C in the Philippines?
BIR Form No. 1604-C must be filed by every employer or withholding agent/payor who is either an individual, estate, trust, partnership, corporation, government controlled corporation or agency, LGU or other juridical entity, that is required to deduct and withhold taxes on compensation paid to employees.
If the taxpayer is a corporation, the return is made under the name of the corporation and must be signed and verified by the president, vice president, or any other authorized officer of that corporation.
What information must be included in BIR Form 1604-C?
When filing BIR Form 1604-C, standard information must be provided including the taxpayer/company name, Tax Identification Number (TIN), registered address, Revenue District Office (RDO) Code and category of withholding agent.
If relevant, the taxpayer will also have to indicate the total value of overremittance on tax withheld on compensation for the previous year.
The employer will then also have to include the date of remittances filed each month with the BIR, the value of each remittance as well as any adjustments made or penalties incurred.
In addition, employers must also attach the following information with BIR Form 1604-C:
- Alphalist of Employees (declared and certified using BIR Form No. 2316)
- Alphalist of Minimum Wage Earners (declared and certified using BIR Form No. 2316).
These requirements are also outlined in the Guidelines and Instructions provided via the BIR website.
What is the filing deadline for BIR Form 1604-C?
BIR Form 1604-C must be filed on or before 31 January of the year following the calendar year in which the compensation payment or other income payments were paid or accrued.
So, BIR Form 1604-C relating to the year 2020 must be filed by 31 January 2021.
How to file?
As with other tax compliance returns in the Philippines, BIR Form 1604-C can be filed via the various filing systems made available by the BIR.
Employers can file through the BIR’s eFPS or eBIR Forms systems for tax compliance. In one of our previous articles on taxation for corporations in the Philippines, we explained how each of these tax compliance filing systems work!
Of course, many employers may also decide to outsource their tax compliance in the Philippines to an outsourced accounting and bookkeeping services provider who can support with the tax compliance process!
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