RR No. 03-2002: Amends certain provisions of RR No. 2-98, as amended, relative to the submission of the Alphabetical Lists of Employees/Payees in diskette form and the substituted filing of Income Tax returns of payees/employees receiving purely compensation income from only one employer for one taxable year whose tax due is equal to tax withheld and individual-payees whose compensation income is subject to Final Withholding Tax

Summary

RR No. 03-2002, issued March 27, 2002, amends certain provisions of RR No. 2-98, as amended. It covers substituted filing of income tax returns by employees and payees, and submission of alphabetical lists of employees and payees in diskette form.

Key points

1. Final withholding tax only. An individual whose sole income was subjected to Final Withholding Tax does not file an income tax return. BIR Form No. 2306, signed by employer and employee, suffices for documentation, such as bank loan or credit card applications.
2. Substituted filing for compensation earners. An individual with purely compensation income from one employer in the Philippines for the calendar year, with tax withheld correctly (tax due equals tax withheld), does not file BIR Form No. 1700, regardless of amount. The employer’s BIR Form No. 1604-CF counts as the substituted filing.
3. Not qualified for substituted filing. These individuals still file BIR Form No. 1700: those with compensation from two or more employers; those whose tax was not correctly withheld; employees with monthly gross compensation not above P 5,000.00 or the statutory minimum wage, whichever is higher, who opted for non-withholding; those with other non-business, non-profession income not otherwise subject to a final tax; those whose spouse is not qualified (only one return is filed); and non-resident aliens engaged in trade or business in the Philippines.
4. Joint certification. The qualified employee and the employer issue a joint certification that the filing of BIR Form No. 1604-CF is the employee’s substituted filing, to the extent amounts match BIR Form No. 2316. It serves the same purposes as a filed BIR Form No. 1700, such as proof of financial capacity, tax credit in the home country, and travel exemption.
5. Optional, then mandatory. For taxable year 2001, non-filing of BIR Form No. 1700 is optional for qualified employees. After that, substituted filing is mandatory where applicable.
6. Diskette submission of lists. Withholding agents may submit the alphabetical lists of employees and payees on 3.5 inch floppy diskettes, in addition to the manual lists. Taxpayers with ten (10) or more employees or income payees must submit the diskettes in the existing CSV data file format together with the manual list.

Who is affected

• Employees with purely compensation income from one employer
• Individuals whose sole income is subject to Final Withholding Tax
• Employers and withholding agents
• Taxpayers with ten (10) or more employees or payees

Deadlines and effectivity

• Joint certification for taxable year 2001: on or before April 15, 2002
• Joint certification afterward: on or before January 31 of the following year, with BIR Form No. 2316
• Optional non-filing for taxable year 2001, mandatory afterward

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.