What You Need to Know About the New Expanded Withholding Tax (BIR Form 1604E)

By March 29, 2019Blog
What You Need to Know About the New Expanded Withholding Tax (BIR Form 1604E)

What do you need to know about the new expanded withholding tax?

  1. Basics
  2. Who needs to pay?
  3. Rates
  4. How to file
  5. Penalties for failure to file

 

Whether you use a tax calculator in the Philippines or not, these are all the new things you should know about Expanded Withholding Tax (BIR form 1604 E). If you have recently become the withholding agent of the company you work for, then this article will have all the important info you need.

 

Basics

The full name of BIR Form 1604 E is the Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes.

Withholding tax, in a nutshell, is the income tax liability deducted by the withholding agent from every working person’s salary. Usually, people have the option of paying their own income tax annually using BIR Form 1701 or quarterly using BIR Form 1701 Q. With the withholding tax, they don’t have to wait until the end of the year or the next taxable quarter. Every 10th of the month, their income tax is automatically deducted from their salary by the withholding agent and remitted to the government for them.

Expanded withholding tax is to be paid by the withholding agent, and should contain the accumulation of all the monthly funds taken from the tax payer’s income.

 

Who needs to pay?

As said before, a withholding agent is the one who physically should bring the expanded withholding tax return containing all the income tax deductions to the BIR from all the people under his control. This withholding agent who is in charge of the BIR online filing of this specific tax could be any of these individuals:

 

  • Licensed professionals
  • Supreme Court
  • Insurance agents and distributors
  • Corporate directors
  • Bookkeeping agents and agencies
  • Management and Technical Consultants
  • Entertainment Industry Employees

 

A withholding agent could also be a whole corporation. If this is the case in your company, for example, the return should have the corporation’s name. Additionally, the return should contain the signatures of the president, vice president, or authorized officer and the treasurer.

 

Rates

Expanded withholding tax rates are dependent on the annual salary of the individual. The only employees liable to pay withholding tax are those earning at least 250,000 pesos per year. Anyone earning less than that amount is exempted automatically. The different types of working individuals included are:

 

Insurance agents and distributors

  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

Bookkeeping agents and agencies

  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

Professionals

  • These include professionals from all sorts of fields such as lawyers, engineers, doctors, CPA, etc.
  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

Professional athletes

  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

Entertainers, talent fee recipients, and Movie Directors

  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

Management and Technical Consultants

  • If their salary is 720,000 and below, their EWT rate is 10%
  • If their salary is above 720,000, it is 15%

 

How to File

When it comes to doing your online BIR filing for Form 1604E, you have to make sure it is on or before March 1 of the current taxable year.

Before you send BIR Form 1604 E through eFPS or eBIR Form, make sure you have all the important details filled. Details include:

  • Date of Remittance
  • Reference Number of Filing or Payment (N/A if not applicable)
  • Bank of Tax Payments Made (N/A if not applicable)
  • The overall amount of withholding tax to be remitted
  • Penalties, if any were made

After you fill out all of those details, you need to attach the Alphalist of Payees Subjected to Withholding Tax. This document is essentially a spreadsheet of the details related to the specific employees who paid their withholding contribution.
The info you should input includes:

  • Name
  • Annual income
  • Each employee’s TIN (taxpayer identification number).

If there are employees exempted, attach an Alphalist of Payees Whose Income is Exempted from Withholding Tax but still subjected to Income Tax.

As a withholding tax agent, making sure you file a withholding tax on time to avoid the late penalty can feel very burdensome. In fact, you could pay an additional 25% of your annual income tax return plus 20% of the same amount for non-filing compliance.

Taxumo Premium, a subscription tax calculator in the Philippines, can prevent this issue from occurring. With its completely transparent procedures and their user-friendly dashboard, filing your BIR Form 1604 has never been easier. It will show the computations, the form info you inputted earlier, and when it will file the tax. Since it knows the filing due date of all taxes, it will submit it to BIR for you in time. Forget the hassle of manually filing your BIR Form 1604 and use Taxumo Premium!

 


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Key Takeaway

As a withholding agent, you are in charge of submitting the expanded withholding tax contributions of all the people who work with you. It can feel overwhelming to have this duty. Thus, this article has all the important information needed to make things easier for you.

 

Don’t worry about withholding taxes

Taxumo files your taxes for you!

Author Evan Tan

Evan Tan is the Chief Marketing Officer of Taxumo. He is a communications professional with over a decade of local and regional professional experience. He also is a founding member of the Philippine LGBT Chamber of Commerce. Apart from his work and advocacy, he is passionate about traveling, working out, reading good books, and discovering vegan restaurants in and out of the country.

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