Keeping up With the TRAIN
Keeping up With the TRAIN
by Nicole U Capinpuyan
Taxpayers can now heave a sigh of relief as another tax filing season has come to pass. As we enter the fifth month since the implementation of Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 11-2018 to implement the amendments introduced by the TRAIN Law on withholding of income tax. Below are some of the points relevant to employers and employees.
Fringe Benefits Tax and Quarterly Tax Filing Updates
For non-rank and file employees who are considered as a citizen, resident alien or non-resident alien engaged in trade or business within the Philippines, Fringe Benefit Tax (FBT) is imposed at a fixed rate of 35% on the grossed-up monetary value of fringe benefits received.
RR No. 11-2018 introduced the following forms:
- Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form No. 1601-EQ)
- Quarterly Remittance Return of Final Income Taxes Withheld (BIR Form No. 1601-FQ)
- Quarterly Remittance Return of Final Income Taxes Withheld (On Fringe Benefits Paid to Employees Other than Rank and File) (BIR Form No. 1603)
These forms are now available in the eBIRForms Package Version 7 and payment of the taxes withheld at source shall be made not later than the last day of the month following the close of the quarter during which the withholding was made. The old filing deadline for BIR Form No. 1603 was the 10th day following the relevant quarter or the 15th day for those covered by the electronic filing and payment system.
Taxation of Minimum Wage Earners (MWEs)
The taxation of MWEs remain unaffected by RR No. 11-2018 as MWEs are still exempt from income tax on their earnings such as the statutory minimum wage as fixed by the Regional Tripartite Wage and Productivity Board (RTWPB)/National Wages and Productivity Commission (NWPC), holiday pay, overtime pay, night shift differential pay, and hazard pay. Aside from the previously mentioned tax-exempt earnings, any additional compensation in excess of the allowable statutory amount of ninety thousand pesos (PHP90,000.00), taxable allowances, and other taxable income given to MWEs shall be subject to withholding tax using the graduated income tax rates of 0% to 35%. The first two hundred fifty thousand pesos (PHP250,000.00) of the MWEs’ taxable additional compensation is tax-exempt.
Changes to Exclusions from Gross Income under TRAIN
The total exclusion for 13th month pay and other benefits received by officials and employees of public and private entities is at the maximum amount of PHP90,000. The old maximum exclusion cap was PHP82,000.
Moreover, de minimis benefits thresholds are increased as follows:
|De Minimis Benefit Allowance||
RR No. 11-2018
|Medical cash allowance to dependents of employees||750 per employee per semester or 125 per month||1,500 per employee per semester or 250 per month|
|Rice Subsidy per month||1,500 or one sack of 50kg||2,000 or one sack of 50kg|
|Uniform and clothing allowance||5,000||6,000|
Annual submissions with the Revenue District Office (RDO)
RR No. 11-2018 implements the separate submissions of the Annual Information Return on Final Income Taxes Withheld (BIR Form No. 1604F) and the Annual Information Return on Income Taxes Withheld on Compensation (BIR Form No. 1604C) together with the corresponding Annual Alphabetical List of Payees on or before January 31 of the following year in which payments were made. The BIR Form Nos. 1604F and 1604C are new forms that have yet to be released by the BIR.
The Certificate of Compensation Payment and Tax Withheld (BIR Form No. 2316) is furnished by the employer to its employee, whose taxes have been deducted and withheld, on or before 31 January of the succeeding calendar year. The form shall be prepared in triplicate (each copy distributed to the BIR, employee, and employer who shall retain the tax form for a period of ten years). The employer shall submit to the concerned RDO the signed BIR Form No. 2316 of its employees who are qualified under substituted filing, not later than February 28 of the succeeding year, with accompanying Certified List of Employees Qualified for Substituted Filing of income tax return reflecting the amount of income payment, the tax due and tax withheld. Under the old rules there was no requirement to submit the certified list.
For employees not qualified for substituted filing of income tax return, two copies of the BIR Form No. 2316 shall be given to the employee to serve as proof of compensation received and tax credit, and the other copy shall be retained by the employer. This shall form part of the employee’s income tax return which is filed on or before April 15 of the following year.
The employee registration procedures for procuring a Taxpayer’s Identification Number (TIN) were streamlined to exclude data requirement for any dependent claim. The use of the e-Registration facility was also highlighted.
The required employee information to be stated in the Application for Registration (BIR Form No. 1902) are as follows:
- Name/TIN/Residential Address of Employee/other information as stated in the BIR Form No. 1902
- Civil status of employee
- Occupational status of the spouse, if applicable
Moreover, the following are the required attachments upon filing the BIR Form No. 1902:
- Any identification issued by an authorized government body (e.g. birth certificate, passport, driver’s license) that shows the name, address, and birthdate of the applicant
- In case of alien employee, Passport and Working Permit or photocopy of duly received Application For Alien Employment Permit (AEP) by the Department of Labor and Employment (DOLE)
- Copy of Marriage contract, if applicable
For manual filers, the BIR Form No. 1902 shall be accomplished in triplicate (each copy distributed to the BIR, employee, and employer) and filed by the employer to the BIR within ten (10) days from the date of employment. Otherwise, the employer may secure the TIN of its new employees using the eRegistration System of the BIR.
Deficiency Interest Penalty
There shall be assessed and collected on any unpaid amount of tax, interest at the rate of double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid. The old interest penalty rate was 20%.
Since its issuance on 17 December 2017, the TRAIN Law has been providing Filipinos with a renewed hope for a better tomorrow. This is further strengthened by the guidelines being issued by the BIR. Though there is still a long journey to take, let’s keep an open mind and open heart as we look forward to further developments aboard the TRAIN.
Nicole U. Capinpuyan is a Supervisor from the Tax Group of KPMG R.G. Manabat & Co. (KPMG RGM&Co.), the Philippine member firm of KPMG International. KPMG RGM&Co. has been recognized as a Tier 1 tax practice, Tier 1 transfer pricing practice, Tier 1 leading tax transactional firm and the 2016 National Transfer Pricing Firm of the Year in the Philippines by the International Tax Review.
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