Two key tax forms relate to these deductions:
BIR Form 1601-C – filed monthly by employers
BIR Form 2316 – provided annually to employees
Understanding these forms helps clarify why taxes are deducted monthly and how they are reported.
1. Monthly Withholding Tax on Compensation
Under the Philippine withholding tax system, employers act as withholding agents on behalf of the Bureau of Internal Revenue (BIR). This means:
A portion of an employee’s salary is withheld every payroll period based on the BIR’s withholding tax table or the TRAIN Law tax brackets.
The withheld amount serves as advance payment of the employee’s annual income tax.
Employees do not have to personally remit taxes monthly—the employer does this for them.
2. What is BIR Form 1601-C?
BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) is the monthly report and remittance form used by employers.
Purpose
To declare the total taxes withheld from all employees for the month
To remit those taxes to the BIR
Who files it?
Employers (not employees)
When is it filed?
On or before the 10th day of the following month
How it affects employees
Ensures that taxes deducted from the employee’s salary are properly reported and remitted to the government
Forms part of the employee’s annual tax record
3. What is BIR Form 2316?
BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) is an annual tax certificate issued to each employee.
Purpose
Shows the total compensation received for the year
Shows the total taxes withheld and remitted on the employee’s behalf
Serves as proof of tax payment
Used for:
Job changes (to provide previous employer’s tax record)
Loan applications
VISA requirements
Year-end or one-time employee tax reconciliation
Who receives and signs it?
Employees receive the certificate
Employers issue and sign it
Employees sign it to acknowledge accuracy
When is it issued?
On or before January 31 of the following year
4. Relationship Between Monthly Tax Deductions, BIR 1601-C, and BIR 2316
How they connect
Every payroll period:
→ Employer computes and withholds tax from employees' salaries.Every month:
→ Employer reports and remits these withheld taxes using BIR Form 1601-C.End of the year:
→ Employer consolidates all monthly data and issues BIR Form 2316 to each employee, summarizing all compensation and taxes withheld for the entire year.
Why this matters
Consistency: Monthly tax remittance (Form 1601-C) ensures all withholdings are properly recorded.
Accuracy: The annual Form 2316 must match the amounts reported in all monthly 1601-C filings.
Compliance: Both forms protect the employer and employee from tax compliance issues.