BIR Form 1601-C: Withholding Tax on Compensation

What Form 1601-C Covers and Who Must File It

BIR Form 1601-C, the Monthly Remittance Return of Income Taxes Withheld on Compensation, is how every employer in the Philippines reports and remits the income tax withheld from employees' salaries, wages, and other compensation. If your business has even one employee under an employer-employee relationship, you are a withholding agent and must file this return every month, whether or not you actually withheld any tax during the period.

This is distinct from withholding tax on purchases of goods and services (Form 1601-EQ or the old 0619-E/1601-EQ regime) and from percentage or value-added tax returns. Form 1601-C applies specifically to compensation income — regular salaries, overtime pay, holiday pay, taxable allowances, commissions, and the taxable portion of bonuses and 13th month pay that exceeds the ₱90,000 exemption threshold. Non-taxable items such as mandatory SSS, PhilHealth, and Pag-IBIG employee contributions, and de minimis benefits within BIR limits, are excluded from the base before you compute tax.

Computing Withholding Tax Using the BIR Tables

Since the effectivity of the second tranche of TRAIN law rates on January 1, 2023, the revised withholding tax table has used the following monthly brackets:

• Compensation range ₱0 to ₱20,833: no withholding tax
• Over ₱20,833 up to ₱33,333: 15% of the excess over ₱20,833
• Over ₱33,333 up to ₱66,667: ₱1,875 plus 20% of the excess over ₱33,333
• Over ₱66,667 up to ₱166,667: ₱8,541.80 plus 25% of the excess over ₱66,667
• Over ₱166,667 up to ₱666,667: ₱33,541.80 plus 30% of the excess over ₱166,667
• Over ₱666,667: ₱183,541.80 plus 35% of the excess over ₱666,667

These monthly figures correspond to the annual graduated brackets (₱250,000, ₱400,000, ₱800,000, ₱2,000,000, and ₱8,000,000) divided by twelve, and the BIR publishes equivalent daily, weekly, and semi-monthly versions of the same table. Before applying the table, deduct mandatory government contributions from gross compensation to arrive at taxable compensation.

Worked example. An employee earns a monthly basic salary of ₱35,000 with no other taxable allowances. Assume employee-side mandatory contributions of roughly ₱1,750 for SSS, ₱875 for PhilHealth (2.5% employee share), and ₱200 for Pag-IBIG — these are illustrative and should be checked against the current SSS, PhilHealth, and Pag-IBIG contribution tables since agency rates are adjusted periodically and are separate from BIR rules. Taxable compensation is ₱35,000 minus ₱2,825, or ₱32,175. This falls in the second bracket (over ₱20,833 up to ₱33,333), so withholding tax equals 15% of (₱32,175 − ₱20,833) = 15% × ₱11,342 = ₱1,701.30 for the month.

In Kontabler, payroll runs apply the current BIR withholding table automatically once you set up each employee's compensation and statutory deductions, and the computed withholding tax is posted to your books and summarized into a ready 1601-C figure without a separate spreadsheet.

Filing and Remitting Form 1601-C Each Month

For employers not enrolled in the Electronic Filing and Payment System (eFPS), Form 1601-C is due on or before the 10th day of the month following the month the compensation was paid or accrued, filed through eBIRForms. eFPS filers follow a staggered schedule based on industry grouping, generally between the 11th and 15th day of the following month; check your specific group assignment on the BIR eFPS portal, as groupings can be updated. For December compensation, the deadline is typically extended to January 15 of the following year to allow for year-end payroll adjustments — confirm this against the current year's BIR filing calendar, since the BIR occasionally issues revenue memorandum circulars adjusting specific due dates.

Under the Ease of Paying Taxes (EOPT) Act, taxpayers may now file returns and pay taxes at any authorized agent bank, Revenue Collection Officer, or accredited payment channel regardless of where they are registered, removing the old requirement to transact only within your home Revenue District Office. Payment can be made electronically through GCash, PayMaya, LandBank Link.Biz, or other BIR-accredited channels, in addition to over-the-counter options.

Common Filing Mistakes and Penalties

The most frequent error is skipping the filing entirely in months with no tax due, such as when all employees fall below the ₱20,833 monthly exemption threshold. A return is still required in these cases; the BIR treats a missed filing as non-compliance regardless of whether any tax was actually withheld. Another common mistake is confusing gross pay with taxable compensation by forgetting to deduct mandatory contributions and qualified de minimis benefits before applying the table, which overstates the tax withheld from employees.

Withholding tax rates, contribution tables, and filing deadlines are adjusted from time to time by the BIR, SSS, PhilHealth, and Pag-IBIG. Always reconfirm the current figures on the respective agency's official website before finalizing payroll for the period.

Late filing or late remittance triggers a 25% surcharge on the basic tax due, 12% annual interest computed from the deadline until full payment, and a compromise penalty that varies by the amount involved. Persistent non-filing can also lead to closure orders for registered businesses under the BIR's Oplan Kandado program, so timely monthly compliance is not optional even for very small payrolls.

Year-End Reconciliation: Forms 1604-C and 2316

The twelve monthly 1601-C filings feed into BIR Form 1604-C, the Annual Information Return of Income Taxes Withheld on Compensation, due on or before January 31 of the following year. This annual return reconciles total compensation paid and total tax withheld against what was reported monthly, and it must be accompanied by the alphalist of employees. Employers must also issue BIR Form 2316 to each employee on or before January 31, or upon separation from employment if earlier, showing the employee's total compensation and tax withheld for the year — this doubles as the employee's substituted filing document if they qualify and had only one employer during the year.

Treating 1601-C filing as a monthly discipline rather than a year-end scramble makes the annual reconciliation far less error-prone, since discrepancies between monthly remittances and annual totals are much easier to catch and correct one month at a time.