Withholding tax obligations and penalties

Withholding tax obligations and penalties

The BIR has issued a reminder to all employers to comply with their withholding tax obligations.  These include the collection and remittance of withholding taxes, as well as performance of year-end adjustments and refund of excess tax withholding on the compensation of their employees.
Non-compliance with these obligations would result in the following violations.

1. Non-withholding  – when there is failure to withhold tax on the taxable income of the employee.
   
2. Underwithholding  –  when employer fails to correctly withhold the tax which should be equal to the tax due.
   
3. Non remittance – when employer fails to remit total amount withheld.
   
4. Late remittance – when employer remits the correct amount withheld beyond the prescribed due date.
   
5. Failure to refund excess taxes withheld – when employer fails/refuses to refund excess taxes withheld to its employees.

Depending on the violation, the penalties may vary from collection of surcharge, interest and in certain cases, compromise penalty in lieu of criminal liability.

Pertinent sections of the Tax Code for the applicable penalties are enumerated in the attached RMC 21-2010.   

P&A Tax Alerts are issued to keep our clients updated with the latest tax developments.  These are not intended to be a substitute for professional advise.   For inquiries and suggestions on how the Tax Alert may be even more useful to you, e-mail Lina.Figueroa@ph.gt.com or Senen.Quizon@ph.gt.com or call 886-5511.

For other tax concerns, please check out our other tax services.