BIR Form No. 2316 and Substituted Filing

Are you an employee? You may still be required to file your own income tax return (ITR).

This will be a long discussion, so let’s talk about the first type of income earner this afternoon.

The Bureau of Internal Revenue classifies individual employees as those earning from:

A. Purely compensation income from 1 employer during the year

B. Purely compensation income from 2 or more employers during the year

C. Compensation income AND income from profession or from business

Only those in category A are qualified to avail of the Substituted Filing of ITR (hence not required to file their own ITR), while those in category B and C are required to file their own ITR.

QUALIFIED FOR SUBSTITUTED FILING

Individuals earning Purely Compensation Income from 1 Employer during the year

For this type of income earner, his/her income tax return is the BIR Form No. 2316 (Certificate of Compensation Payment/Tax Withheld for Compensation Payment with or Without Tax Withheld).

This certificate is distributed by employers on or before January 31 of the following year, or in case of termination of employment, it must be issued on the same day when the last payment of wages was made.

This form summarizes all the compensation income provided to you by your employer as well as the related annual tax due.

Once you receive the certificate, ensure that you place your signature twice on the document. The first signature is to signify that the certificate is true and correct, while the second is to indicate that you are qualified for substituted filing – which means that when your employer filed the BIR Form No. 2316 to the BIR it can become a substitute to the filing of the Annual ITR for Individuals Earning Purely Compensation Income (BIR Form No. 1700).

Later, you do NOT need to file your own ITR as the BIR Form No. 2316 will serve as the substitute and proof that your income has already been subjected to income tax and that the same is paid and filed with the Bureau.

Note that individual taxpayers qualified for substituted filing are only those:

· receiving purely compensation income, regardless of amount

· with only one employer in the Philippines for the calendar year

· the income tax of which has been withheld correctly by the said employer (tax due equals tax withheld)

NOT QUALIFIED FOR SUBSTITUTED FILING

Under Section 2.83.4 of BIR Revenue Regulations (RR) No. 02-98, as amended by RR No. 11-18, the following individuals are not qualified for substituted filing and therefore, still required to File Income Tax Return in accordance with existing regulations:

1. Individuals deriving compensation from two or more employers concurrently or successively at any time during the taxable year.

2. Employees deriving compensation income, regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e., tax due is not equal to the tax withheld) resulting to collectible or refundable return.

3. Individuals deriving other non-business, non-professional-related income in addition to compensation income not otherwise subject to a final tax.

4. Individuals receiving purely compensation income from a single employer, although the income tax of which has been correctly withheld, but whose spouse falls under Section 2.83.4(A), 2.83.4(B) and 2.83.4(C) of these regulations.

5. Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income, or compensation income and other non-business, non-professional-related income

Since January 31 is just in a few days, be sure to request this certificate from your employer and sign twice on the document if you are only earning purely compensation income during the year.

We hope this provided you a clearer insight on the tax forms distributed by your employers.

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