Employers must understand the withholding tax framework that applies when processing and computing payroll in the Philippines!
That’s why, in this article, we examine BIR Form 1604-C!
BIR Form 1604-C is a key annual payroll-related tax return that must be filed by employers in the Philippines to confirm the value of the tax on compensation withheld from their employees during the previous tax year.
Enjoy and don’t hesitate to contact the CloudCfo Team at any stage about your payroll needs here in the Philippines!
What is BIR Form 1604-C?
BIR Form No. 1604-C is also known as the Annual Information Return of Income Taxes Withheld on Compensation.
In the Philippines, employers are obliged to compute, deduct and withhold part of the value of an employee’s compensation, or salary payment, before the payment goes out to each employee for each payroll cycle.
Employers are required to file monthly withholding tax on compensation returns to the BIR through the completion and submission of BIR Form 1601-C and then subsequently, remit the relevant tax payments to the BIR.
In effect, BIR Form 1601-C should include the total value of the compensation tax withheld on payroll payments from all employees during the previous month.
Then, at the end of each year, employers are required to submit an annual report to the BIR that comprehensively and accurately summarizes the overall total amount of income tax withheld on compensation from employees during that previous year.
The mechanism for filing this annual return which summarizes and confirms the total value of compensation tax withheld is via BIR Form 1604-C.
Who Must File BIR Form 1604-C?
BIR Form 1604-C must be filed by every employer or withholding agent/payor in the Philippines 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 their employees.
If the taxpayer is a corporation in the Philippines, the tax 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.
Importantly – the obligation to file BIR Form 1604-C lies with the employer – not the employees!
This means that it is the employer’s responsibility to a) ensure that the correct amount of compensation tax is withheld from employees during each financial year and filed with the BIR each month, and b) ensure that they submit BIR Form 1604-C to the BIR at the end of each year to evidence the fact that the correct amount of withholding tax on compensation was applied!
Computing Withholding Tax on Compensation
The computation rate to be applied when computing withholding tax on compensation in the Philippines will vary depending on both the level of compensation and the status of each individual employee.
In one of our previous articles, Employers in the Philippines – Withholding Tax on Compensation Explained!, we provided a comprehensive summary and outline of how withholding tax on compensation should be computed in the Philippines!
Feel free to check out the article above to get an in-depth view of your Withholding Tax on Compensation obligations as an employer in the Philippines.
Additionally, the BIR also provides helpful support, which can be viewed via the BIR Website, on how to compute withholding tax on compensation by providing a Withholding Tax Table for Compensation Tax Rates for PH employers to consult when computing withholding tax on compensation.
What Information Must be Included in BIR Form 1604-C?
When filing BIR Form 1604-C, there are various items of quite standard information that must be included together with the total value of the withholding tax on compensation.
To provide some form of reference for PH employers, we have indicated below just some of these standard items of information that must be referenced:
- The Taxpayer or Full Company Name
- The Tax Identification Number (TIN)
- Registered Address of the Company
- Revenue District Office (RDO) (where the company is registered)
- Code and Category of Withholding Agent (i.e. the withholding tax status of the company)
If you need help finding any of the above information, most of it can be found quite easily on the company’s BIR Form 2303, also commonly known as the COR, or BIR Certificate of Registration.
If applicable, a taxpayer may also have to sometimes indicate the total value of over-remittance on tax withheld on compensation for the previous year. This arises in circumstances where the employer has withheld too much compensation tax from its employees.
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.
Finally, employers must also attach the following information or lists together 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).
What is the Tax Filing Deadline for BIR Form 1604-C?
31 January is the key date for filing BIR Form 1604-C each year in the Philippines!
BIR Form 1604-C must be filed on or before 31 January of the year following the end of the calendar year in which the compensation payment or other income payments were paid to or accrued by employees.
So, for example, BIR Form 1604-C relating to the year 2022 must be filed by 31 January 2023!
How to File BIR Form 1604-C?
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 and how the BIR’s online filing system can be used by companies to ensure the most efficient mechanism for filing taxes in the Philippines.
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