QuestionsQuestions (BIR MEMORANDUM CIRCULAR NO. 01-2003)
It is the scheme where the employer’s annual information return (BIR Form 1604-CF) is considered as the employee’s substitute income tax return because the information the employee would report in BIR Form 1700 is exactly the same as what is contained in the employer’s BIR Form 1604-CF.
Substituted filing applies when the taxpayer is required to file but does not need to personally file BIR Form 1700 because the employer’s BIR Form 1604-CF serves as the substitute return. Non-filing applies to individuals who are not required by law to file an ITR in the first place (e.g., certain employees whose pure compensation income does not exceed the threshold and whose withholding equals tax due).
Individuals who receive purely compensation income, only from one employer in the Philippines during the taxable year, with tax due equal to tax withheld, and—if married—the spouse also satisfies the same conditions, provided the employer files BIR Form 1604-CF and issues the employee BIR Form 2316 (Oct 2002 ENCS version).
For taxable year 2002 and beyond, substituted filing is mandatory for qualified employees; hence, they will no longer file BIR Form 1700 on or before April 15.
Not qualified includes: (1) employees deriving compensation from two or more employers at any time during the taxable year; (2) cases where withholding was not correct such that tax due is not equal to tax withheld, resulting in collectible or refundable return; (3) employees whose monthly gross compensation does not exceed P5,000 or statutory minimum wage, whichever is higher, and opted for non-withholding; (4) employees who earn other income (non-business, non-profession-related) in addition to compensation not subject to final tax; (5) employees with qualified single-employer compensation income but spouse is not entitled to substituted filing; and (6) non-resident aliens engaged in trade or business deriving purely compensation or compensation plus other business/profession-related income.
It is a certificate signed by both employer and employee and serves the same purpose as if BIR Form 1700 had been filed. If the employee is qualified for substituted filing, the certificate is not submitted/filed with the BIR as the personal ITR.
BIR Form 2316 (Oct 2002 ENCS version) shall be presented instead of BIR Form 1700, since it is signed by both employee and employer and serves the same purpose as the filed ITR.
Part I (Employee Information), Part II (Present Employer Information), Part III (Previous Employer Information, if any), Part IV (Details of Compensation Income and Tax withheld from the present employer), and two signature boxes including the 2nd signature box for substituted filing (items 53 and 54).
That the information in BIR Form 2316 matches the employer’s BIR Form 1604-CF (including employee and previous employer information if applicable), that present employer information is true and correct, the details of compensation and taxes withheld are true and correct, and that the employer filed the annual information return (BIR Form 1604-CF) with the BIR.
That the employee is qualified (pure compensation income, only one employer in the Philippines, tax due equals tax withheld, and if married the spouse also satisfies the conditions), that the employee has no disqualifying instances, that the BIR Form 1604-CF filed by the employer constitutes the employee’s ITR, and that BIR Form 2316 serves the same purpose as if BIR Form 1700 had been filed.
No. For taxable year 2002 and beyond, substituted filing is mandatory for qualified employees; thus, they should not file BIR Form 1700.
No. The circular states that notarization is not necessary for BIR Form 2316 for qualified employees under substituted filing.
He should submit a copy of the BIR Form 2316 issued by the previous employer to his present employer so it can be consolidated with his compensation from the current employer.
It may be used as proof of financial capacity for loans/credit cards/other applications, proof of tax payment or for availing tax credit abroad, and for securing travel permits and travel tax exemptions, among other requirements of government or private offices.