Section 57 and 79(A) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended, require the withholding of taxes by the payor of income/employer  (withholding  agent)  on  certain  income  payments  and  on salaries and wages of employees,  respectively.  Such taxes withheld shall then be remitted by the withholding agent to the BIR by filing the monthly remittance returns (BIR Form 1601 E, 1601 F, 1601 C) and paying the corresponding  tax due.

In  addition  to  the  filing  of  remittance  returns  and  payment  of  the  taxes withheld, withholding agents are likewise required, pursuant to Section 58(C) and 83 (B) of the same Code, to submit to the BIR an Annual information Return (BIR Form 1604E, 1604CF) together with the Alphabetical List of Payees/Employees. Such return is a no payment return. Instead, it contains, among others, the information regarding the monthly remittance of taxes withheld and the summary of payees from whom taxes were withheld and already remitted to the BIR during the taxable year.

With  the  filing  of  monthly  remittance  returns  and  payment  of  the  taxes withheld, the requirement for the deductibility of expenses which have been subjected to withholding tax were already complied. Thus, failure to file the Alphabetical List of Payees/Employees or failure to re-submit the complete and corrected alphabetical list after the validation process conducted by the BIR shall not result to the non-deductibility of the expenses considering that the taxes corresponding thereto were already withheld and remitted.

However, considering that failure/non-filing of alphabetical list of payees/ employees or the failure to submit the complete or corrected one is a violation of the provisions of the Tax Code and existing issuances, a compromise penalty of One Thousand Pesos (P1,000,00) shall be imposed for each failure to make, file or submit the said information return which aggregate amount to be imposed for such failures during the calendar year shall not exceed Twenty Five Thousand Pesos (P25,000.00), pursuant to Revenue Memorandum Order No. 7-2015. Payment  of  the  compromise  penalty  shall,  in  no  way,  relieve  the  withholding agent from the submission of the required Alphabetical List or the complete or corrected alphabetical list.

This Circular supersedes Revenue Memorandum  Circular No. 5-2014, in so far as Item No. 15 is concerned, and all other issuances inconsistent herewith.

All concerned are hereby enjoined to give this Circular a wide publicity as possible.