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This page features the full text of
Republic Act No. 7497
"Finality
of the Withholding Tax on Purely Compensation Income"
AN
ACT AMENDING PERTINENT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE,
AS AMENDED, RELATIVE TO THE FINAL WITHHOLDING TAX ON PURELY
COMPENSATION
INCOME.
REPUBLIC
ACT NO. 7497AN
ACT AMENDING PERTINENT PROVISIONS OF THE NATIONAL INTERNAL REVENUE
CODE,
AS AMENDED, RELATIVE TO THE FINAL WITHHOLDING TAX ON PURELY
COMPENSATION
INCOME.
Section
1. Title. — This Act shall be
known as the "Finality of the Withholding Tax on Purely
Compensation
Income."
Sec.
2. Declaration of Policy. — It
is the policy of the State to further enhance the development of the
tax
system in our country thus simplifying compliance and administration of
the withholding tax system on purely compensation income. chanrobles virtuallaw libraryred
Sec.
3. Coverage. — Every employer
making payment of compensation income shall deduct and withhold a tax
in
an amount equal to the tax due on the employee's compensation income
for
the entire year, in accordance with Section 21(a) of the National
Internal
Revenue Code, as amended.cralaw:red
Sec.
4. The last paragraph of paragraph(a)
of Section 21 of the National Internal Revenue Code, as amended, is
hereby
further amended to read as follows:
"In
the case of married individuals, the husband and wife, subject to the
provision
of Section 44(d) hereof, shall compute separately their individual
income
tax based on their respective total taxable income: Provided, That if
any
income cannot be definitely attributable to or identifiable as income
exclusively
earned or realized by either of the spouses, the same shall be divided
equally between the spouses for the purpose of computing their
respective
taxable income."
Sec.
5. The first paragraph of item
(1), paragraph (1) of Section 29 of the same Code, as amended, is
hereby
further amended to read as follows: chanrobles virtuallaw libraryred
"(1) Personal
exemptions allowable to individuals. — "(1) Basic
personal exemption. — For the purpose of determining the tax provided
in
Section 21(a) of this Title, there shall be allowed a basic personal
exemption
as follows:chanroblesvirtualawlibrary"For
single individual or married individual judicially
decreed as legally separated with noqualified
dependents P 9,000"For
head of a family P12,000
"For
each married individual P18,000
Provided,
That, in case one of the spouses is deriving taxable income, only said
spouse shall be allowed to avail of the aforesaid basic personal
exemption
for married individual."
Sec.
6. The first paragraph of item
(2) (A), paragraph (1) of Section 29 of the same Code, as amended, is
hereby
further amended to read as follows:chanrobles virtuallaw libraryred
"(2) Additional
exemptions — "(A) Taxpayers
with dependents. — A married individual or a head of a family shall be
allowed an additional exemption of Five thousand pesos (P5,000) for
each
dependent: Provided, That the total number of dependents for which
additional
exemptions may be claimed shall not exceed four dependents: Provided,
further,
That the additional exemption for dependents shall be claimed by only
one
of the spouses in the case of married individuals."
Sec.
7. A new paragraph (C) is hereby
added to Section 44(a)(2) of the National Internal Revenue Code, as
amended,
to read as follows:
"(C) Individuals
with respect to pure compensation income, as defined in Section
28(a)(1),
derived from sources within the Philippines, the income tax on which
has
been withheld under the provisions of Section 72 of this Code:
Provided,
That an individual deriving compensation concurrently from two or more
employers at any time during the taxable year shall file an income tax
return: Provided, further, That an individual whose pure compensation
income
exceeds Sixty thousand pesos (P60,000) shall also file an income tax
return."
Sec.
8. Paragraph (d) of Section 44
of the same Code, as amended, is hereby further amended to read as
follows:
"(d) Husband
and wife. — Married individuals, whether citizens, resident or
nonresident
aliens who do not derive income purely from compensation, shall file a
return for the taxable year to include the income of both spouses, but
where it is impracticable for the spouses to file one return, each
spouse
may file a separate return of income but the returns so filed shall be
consolidated by the Bureau for purposes of verification for the taxable
year." chanrobles virtuallaw libraryred
Sec.
9. Section 72(d)(B) of the same
Code, as amended, is hereby further amended to read as follows:
"(B) Change
of status. — In case of change of status of an employee as a result of
which he would be entitled to a lesser or greater amount of exemption,
the employee shall, within ten days from such change, file with the
employer
a new withholding exemption certificate reflecting the change."
Sec.
10. Item (1), paragraph (f) of
Section 72 of the same Code, as amended, is hereby further amended to
read
as follows:
"(1) The
husband shall be deemed the head of the family and proper claimant of
the
additional exemption in respect to any dependent children, unless he
explicitly
waives his right in favor of his wife in the withholding exemption
certificate;"
Sec.
11. A new paragraph (h) is hereby
added to Section 72 of the National Internal Revenue Code, as amended,
to read as follows:
"(h) Year-end
adjustment. — On or before the end of the calendar year but prior to
the
payment of the compensation for the last payroll period, the employer
shall
determine the tax due from each employee on taxable compensation income
for the entire taxable year in accordance with Section 21(a). The
difference
between the tax due from the employee for the entire year and the sum
of
taxes withheld from January to November shall either be withheld from
his
salary in December of the current calendar year or refunded to the
employee,
not later than January 25 of the succeeding year."
Sec.
12. Section 73 of the same Code,
as amended, is hereby further amended to read as follows:
"Sec.
73. Liability for tax. — (a)
Employer. — The employer shall be liable for the withholding and
remittance
of the correct amount of tax required to be deducted and withheld under
this Chapter. If the employer fails to withhold and remit the correct
amount
of tax as required to be withheld under the provision of this Chapter,
such tax shall be collected from the employer together with the
penalties
or additions to the tax otherwise applicable in respect of such failure
to withhold and remit.chanrobles virtual law library "(b) Employee.
— Where an employee fails or refuses to file the withholding exemption
certificate or willfully supplies false or inaccurate information
thereunder,
the tax otherwise to be withheld by the employer shall be collected
from
him including penalties or additions to the tax from the due date of
remittance
until the date of payment. On the other hand, excess taxes withheld
made
by the employer due to: (a) failure or refusal to file the withholding
exemption certificate; or (b) false and inaccurate information shall
not
be refunded to the employee but shall be forfeited in favor of the
Government." chanrobles virtuallaw libraryred
Sec.
13. A new section, Section 251-A,
is hereby added in the National Internal Revenue Code, as amended,
which
shall read as follows:
"Sec.
251-A. Failure of a withholding
agent to refund excess withholding tax. — Any employer/withholding
agent
who fails, or refuses to refund excess withholding tax shall, in
addition
to the penalties provided in this Title, be liable to a penalty equal
to
the total amount of refunds which was not refunded to the employee
resulting
from any excess of the amount withheld over the tax actually due on
their
return."
Sec.
14. The first paragraph of Section
254 of the same Code, as amended, is hereby further amended to read as
follows:
"Sec.
254. Failure to file return,
supply correct and accurate information, pay tax, withhold and remit
tax
and refund excess taxes withheld on compensation. — Any person required
under this Code or by regulations promulgated thereunder to pay any
tax,
make a return, keep any record, or supply correct and accurate
information,
who willfully fails to pay such tax, make such return, keep such
record,
or supply such correct and accurate information, or withhold or remit
taxes
withheld, or refund excess taxes withheld on compensation, at the time
or times required by law or regulations shall, in addition, to other
penalties
provided by law, upon conviction thereof, be fined of not less than Ten
thousand pesos (P10,000) and imprisonment of not less than one (1) year
but not more than ten (10) years."chanrobles virtuallaw libraryred
Sec.
15. Rules and Regulations. —
The Bureau of Internal Revenue shall issue and publish the implementing
rules and regulations to implement the provisions of this Act.chanrobles virtual law library
Sec.
16. Reportorial Requirement.
— The Bureau of Internal Revenue shall provide Congress with an annual
report with respect to the implementation of the provision of this
Act.chanrobles virtual law library
Sec.
17. Repealing Clause. — Any law,
decree, order, rule and regulation, or part thereof, which is
inconsistent
with this Act is hereby repealed or modified accordingly.cralaw:red
Sec.
18. Effectivity Clause. — This
Act shall take effect upon its approval. chanrobles virtuallaw libraryred
Approved:
May
15, 1992
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