Secondees’ new requirements, I second that!
TOP OF MIND - Mark Joseph Pe (The Philippine Star) - January 28, 2020 - 12:00am

In 2018, TRAIN removed the preferential income tax rate of 15 percent for individuals employed by regional headquarters (RHQs), regional operating headquarters (ROHQs), offshore banking units (OBUs), and petroleum service contractors and subcontractors. This was in line with the promotion of fairness of the tax system for individuals performing similar work. As a result, these employees including alien individuals are now subject to the graduated income tax rates of 0 percent to 35 percent.

The Bureau of Internal Revenue (BIR) in its issuance of Revenue Memorandum Circular (RMC) No. 116-2019, clarified the treatment (i.e. employer/employee tax filing requirements) of alien individuals employed by ROHQs, RHQs, OBUs, and petroleum service contractors and subcontractors. The circular mentioned that alien individuals who are employed by such entities are subject to the same administrative requirements being imposed on other regular employees, such as substituted filing, issuance of Certificate of Compensation Payment / Tax Withheld For Compensation Payment With or Without Tax Withheld (BIR Form No. 2316), and inclusion in the monthly withholding tax remittance on compensation, as well as the prescribed alphalists.

The RMC also clarified that alien individuals who are employed by foreign principals and who are assigned to render services exclusively to these local entities (otherwise known as “seconded employees or secondees”), are, likewise, subject to the regular income tax rates. Local entities, to whom the seconded employees render their services, shall comply with the same administrative requirements except for substituted filing, imposed by the BIR for regular employees.

If we go back to Revenue Regulations (RR) No. 3-2002, non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income, or compensation income and other non-business, non-profession related income are not qualified for substituted filing and therefore, still required to file BIR Form No. 1700. Under RMC 116-2019, it would seem that whether or not these taxpayers would qualify for substituted filing depends on the type of employer that they have, as discussed previously.

In addition to the above, the following procedures shall be complied with by these local entities: (1) A separate employment status and description for “seconded employees” shall be provided in the alphalist itself, as well as in the alphalist data entry and validation module version 6.1, (2) Seconded employees shall file their annual income tax return and pay the income tax due, if applicable, together with the attached BIR Form No. 2316, (3) The phrase “For Seconded Employee” shall be typed or printed in all copies of BIR Form No. 2316, and (4) In case of termination of their services before the end of the taxable year, the local entities shall ensure that the withholding tax on their last salaries shall be computed.

Given the above requirements for substituted filing, Philippine employers must also take note that the BIR provided an extension of deadline for submission of the Annual Information Return of Income Taxes Withheld on Compensation and Final Withholding Taxes (BIR Form Nos. 1604C and 1604F), including the Alphabetical List of Employees/Payees From Whom Taxes Were Withheld, from Jan. 31, 2020 to Feb. 28, 2020 as per RMC No. 124-2019. The extension of the deadline is a result of the ongoing enhancement of the alphalist data entry and validation module. Employers should keep in mind that the deadline for submission of the alphalist coincides with the submission of the Certified List of Employees Qualified for Substituted Filing of ITR with copies of BIR Form No. 2316. In this case, it is recommended for employers to accomplish the alphalist at an earlier date to be able to submit the certified list of employees along with BIR Form No. 2316 on or before the deadline.

The requirement of RMC 116-2019 which requires labeling of BIR Form No. 2316 with “seconded employees” may seem trivial. However, in the future, it is possible that the BIR may consider the imposition of the additional requirements to different types of employees in the Philippines which will give them a better insight of the tax reporting and compliance of Philippine workforce. This could mean that they will have quality information that can be used to improve the reliability and transparency of their services and their collection efforts. This could also mean a good synergy between the BIR and the taxpayers, and as a tax professional, I second that!

Mark Joseph M. Pe is an assistant manager 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 and Tier 1 transfer pricing practice by the International Tax Review.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG RGM&Co. For comments or inquiries, please email or

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