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New year, new regulations

New year, new regulations

AS WE usher in the New Year, some of us have set our new year’s resolutions or certain personal rules that we aim to follow throughout the year. Apparently, the Bureau of Internal Revenue (BIR) had a similar idea when it issued a new regulation to be followed by the taxpayers.

On January 10, the Commissioner of Internal Revenue (CIR) issued Revenue Regulations No. (RR) 1-2014, which amend RR 2-98 and RR 10-2008 regarding the submission of an alphabetical list of employees and/or list of payees of income payments.

Under the new regulation, taxpayers required to withhold are required to submit an alphabetical list of employees and list of payees of income payments subject to creditable and final withholding tax. The list is to be attached as an integral part of the Annual Information Returns (BIR Forms 1604CF/ 1604E) and Monthly Remittance Returns (BIR Form 1601 C, etc.).

Under existing rules, manual submission of the alphabetical list of employees and list of payees of income payments subject to withholding tax is allowed by the BIR. However, under RR 1-2014, manual submission is no longer allowed. The only acceptable modes of submission of the alphabetical list are:

 1. as an attachment in the electronic filing and payment system (EFPS;,

 2. electronic submission via the BIR’s Web site, and

 3. e-mail to the dedicated BIR address ( using CSV file format.

In addition to the foregoing, RR 1-2014 requires all income payments to be specifically enumerated, i.e. each payee must be specifically listed in the alphalist.

This means that income payments and taxes withheld which are lumped into a single amount and listed as a group -- such as various payees, various employees, PCD nominees, and the like -- are no longer allowed.

In short, under the new regulations, withholding agents must strictly comply with the technical (format) and substantial (details) requirements set forth therein; otherwise, the income payments subject of the “incorrect” or “non-compliant” submission of the alphabetical list of employees or income payees shall not be allowed as deductible expense.

A reading of the regulations shows that there are two main requirements that a withholding agent must comply with so that the income payments will be allowed as a deductible expense.

First, the list of employees or income payees must enumerate each recipient of the income payments, and there must be no grouping of payees into one category. Second, the alphabetical list submitted to the BIR must be in the format required, which is CSV file format for e-mail submission.

Failure to comply with any of the two requirements will result in non-deductibility of the income payments and will be considered as failure to file the required alphabetical list. Hence, the non-deductibility of income payment and failure to file will be applied in both instances:

1. the list is substantially compliant (i.e. it has specifically enumerated each income payee), but is not in the format required, or

2. the file format is correct but the list contains income payments that were lumped together.

However, please note that the regulation also mentions the issuance of another regulation in so far as CSV format filing is concerned. Although Revenue Memorandum Circular No. (RMC) 5-2009 circularizes the file format to be used in the submission of alphalist in electronic form, its applicability pending the issuance of the new regulation is not clearly provided under RR 1-2014. One may wonder, why should a taxpayer be penalized for non-compliance if there are still regulations that are yet to be issued, d etailing the compliance required in RR 1-2014?

Moreover, an issue arises on whether the submission of monthly alphalist on BIR form 1601-C is now applicable. Currently, alphalist is not required to be submitted with BIR 1601-C, and the current EFPS format does not allow for attachments.

While the submission of the list of employees and income payments has already been implemented long ago, and taxpayers have already been complying with this, the penalty imposed for non-compliance on the proper format required seems too high a price for the taxpayers. Take note that failure to file an information return under Section 250 of the National Internal Revenue Code (NIRC) is subject to payment of a fine of P1,000 for every return that was not filed. It appears that failure to file the information return under Section 250 of the NIRC imposes a lower penalty than that provided under the RR 1-2014 for failing to comply with the technical and/or substantial requirements for filing the alphabetical list. Hence, given the foregoing, the taxpayer is put to a quandary -- to comply or not to comply.

Finally, the regulation was published in the newspaper on Jan. 13 and is thus effective by Jan. 28. Accordingly, compliance must be made for filing of BIR Form 1604CF and 1604E immediately, as the regulation is already effective on the deadline for the filing of the same, i.e. Jan. 31.