The new annual information returns

Early last year, the tax authorities issued Revenue Regulations (RR) No. 11-2018 amending certain provisions of RR No. 2-98, as amended, and implementing provisions or amendments introduced by the Tax Reform for Acceleration and Inclusion (TRAIN) Law relative to withholding taxes.

One significant change introduced by RR No. 11-2018 is the splitting of BIR Form 1604-CF (annual information return of income tax withheld on compensation and final withholding taxes) into BIR Form 1604-C for income taxes withheld on compensation and BIR Form 1604-F for final withholding taxes.  Hence, starting calendar this year, withholding agents are required to file separate annual information returns for withholding taxes on compensation and final withholding taxes.

On July 23, the BIR announced the availability on its website of BIR Forms 1604-F and 1604-C, as well as the availability of the revised BIR Form 1604-E (annual information return of creditable income taxes withheld (expanded)/income payments exempt from withholding tax), through Revenue Memorandum Circular (RMC) No. 73-2019.

New and revised annual information returns are available on the BIR website in their manual forms, but as the deadline for the filing of the annual information returns nears, it can be expected that they will also be made available in the electronic filing and payment system (eFPS) and electronic BIR Forms (eBIRForms). 

Under existing regulations, withholding agents are required to file the BIR Form 1604-C and BIR Form 1604-F on or before Jan. 31 of the year following the calendar year in which the compensation payment and other income payments were paid or accrued.  The BIR Form 1604-E, on the other hand, should be filed by withholding agents on or before March 1 of the year following the year in which the income payments were made.

Aside from the new and revised annual information returns, withholding agents should take note of the new format for the alphabetical listing (alphalist) of employees.  The alphalist of employees is a mandatory attachment to the BIR Form 1604-C.  The new alphalist requires information on the employment status of the employees, i.e. regular, casual, contractual, project-based, seasonal, probationary, or learners/apprentice, and, the reason for their separation, if applicable.

Withholding agents should also take note of the availability on the BIR website of the enhanced BIR Form 2306 (certificate of final tax withheld at source) and BIR Form 2307 (certificate of creditable tax withheld at source), announced by the BIR through RMC No. 74-2019 dated July 23.

Under existing regulations, withholding agents are required to furnish, in triplicate, each payee, whether individual or corporate, with a BIR Form 2307, showing the income payments made and the amount of taxes withheld therefrom, for every month of the quarter, within 20 days following the close of the taxable quarter.  For final withholding taxes, the BIR Form 2306 should be given to the payee on or before Jan. 31 of the succeeding year. 

Withholding agents are urged to keep themselves abreast of the new returns and BIR forms because under existing revenue issuances, failure to file an information return is subject to administrative penalties. On the other hand, failure to furnish the BIR Forms 2306/2307, upon a verified complaint from the payee, can trigger a mandatory tax audit of the withholding agent’s income tax liabilities.

Sir Carlon M. Ticzon is an associate 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 [email protected] or [email protected].