Let's Talk Tax

What’s new in BIR registration for employees

More often than not, employees rely solely on their employers to handle matters involving their registration with government offices, such as the Bureau of Internal Revenue (BIR). Unfortunately, employees sometimes find themselves in a situation where they are made to deal with their registration updates on their own rather than their employers doing it for them. This is normally the case when an employee has recently changed employers. If you have not heard the latest updates from the BIR, you are probably bombarding that staff member from Human Resources (HR) now with questions about how you are supposed to update your BIR registration and why it is you, not them, who should handle the update. If your HR team is well versed in the new procedures, lucky you. But what if they are not? You might then have to resort to Googling, hoping to come across a checklist or set of guidelines to refer to. Look no further, because you have just clicked on the right link with the answer to your problem.

You may want to quit glowering at the poor HR staff members, because, whether you like it or not, you are actually now responsible for updating your BIR registration, as mandated by Revenue Memorandum Order (RMO) No. 37-2019. Updating your registration is very simple; so worry not, as you only need to accomplish the Application for Registration Information Update/Correction/Cancellation Form (BIR Form 1905 – January 2018 ENCS). If there is a change in employer or a transfer from the Head Office to the Branch (or vice versa) of the same employer, the duly accomplished BIR Form 1905 needs to be submitted to the Revenue District Office (RDO) where you are currently registered. If you are unsure of which RDO, you may request a copy of your Application for Registration for Individuals Earning Purely Compensation Income (BIR Form 1902) from your previous employer or visit any RDO to request Taxpayer Identification Number (TIN) verification to verify your registered RDO. Under RMO No. 37-2019, the duly accomplished and signed BIR Form 1905, accompanied by a valid government-issued Identification Card (ID), may also be submitted through fax or email to the old/previous RDO to effect the request for transfer.

One notable new requirement provided in RMO No. 37-2019 for employees who earn purely compensation income and who have subsequently changed their employer is the transfer of their registration records to the RDO having jurisdiction over the place of the employees’ residence rather than the RDO of the new employer. The RMO, however, did not specify whether it shall be the permanent residence or the current residence address of the employee.

Prior to the issuance of RMO No. 37-2019, employees who recently changed employers update their BIR registration records through their new employer by filing a Certificate of Update of Exemption and of Employer’s and Employee’s Information (BIR Form 2305). In BIR Form 2305, both the employee’s residential address and the employer’s registered address are provided. However, the RDO having jurisdiction over the employer’s registered address is considered the employee’s registered RDO. The main reason for associating the employee with its employer’s RDO is to align it with the taxing jurisdiction where the employee’s compensation income subjected to withholding tax is earned. Given that there were no recent changes in the tax situs of compensation earned by employees, it is quite a wonder why the new RMO would now require transferring the employee’s registration to the RDO of their residence. It is possible, however, that the new requirement might be suggesting that the employee needs to file with the RDO of his residence, his annual income tax return for the taxable year when he had more than one employer since he will not be covered by substituted filing. Nevertheless, this new requirement may lessen the hassle of updating an employee’s records, particularly his registered address and RDO, each time he transfers from one employer to another.

The following are further updates on employee registration, with noted ambiguities in some of the RMO provisions:

1. Employees’ registration records shall be automatically transferred to the employer’s new RDO in case the employees’ residence address is under the same RDO of the employer’s new business address.

2. Mass transfer of employees’ registration records through submission by the employer of the duly accomplished BIR Form 1905 of the employees. However, the RMO failed to specify whether the transfer of the employees’ records must be made to the RDO of the employees’ residence or the employer’s new RDO. It may be sensible to assume that the transfer needs to be made to the RDO of the employee’s residence address, which is consistent with the treatment of when an employee transfers from the Head Office to Branch (or vice versa) of the same employer. Nevertheless, it is still better if the BIR can shed some light on this.

3. New employees who have no TIN must register at the RDO having jurisdiction over the place of business where the employer’s Head Office or Branch is physically located. Further, employees with concurrent multiple employment need to secure their TIN at the RDO having jurisdiction over the principal or main employer. This, again, is somehow inconsistent with the implications of the other provisions of RMO No. 37-2019, which seem to be geared towards maintaining the employees’ registration records with the RDO of their residence address.

4. Employers are responsible for securing the TIN of new employees within 10 days from the date of employment. All employers (except non-Large Taxpayer, non-TAMP, and non-eFPS registered) are to secure their new employees’ TIN using the eRegistration (eReg) System. In case of unavailability of the eReg, TIN application must be made manually through the submission of duly accomplished BIR Form 1902 with the employer’s RDO (in case of Non-Large Taxpayer-Employer) or the RDO having jurisdiction over the place of business where the employer’s Head Office or Branch is physically located (in case of Large Taxpayer-Employer).

I hope the BIR can clarify the inconsistencies and vague areas in RMO No. 37-2019 to properly guide both employees and employers.

On another note, the RMO imposes a penalty of P1,000 per employee to employers who instruct their employees to secure their TIN from the employer’s RDO and present a photocopied eReg System message. Erroneous or invalid information supplied in the eReg system will likewise result in a penalty of P1,000 for every instance, not to exceed P25,000 in a given taxable year.

Last, the RMO requires that requests for issuance of TIN Card be made personally by the requesting employee. If the employee is not available to receive the new TIN Card, a Special Power of Attorney needs to be executed for presentation by the authorized representative to the RDO that will issue the TIN card, subject to the approval of the concerned Revenue District Officer. Note that in case a TIN Card has been previously issued, subsequent request for issuance due to lost or damaged TIN Card is subject to a P100 charge.

It is important that we are aware of at least the basic things about our registration status, not only with the BIR, but even with other government agencies as well, to avoid any inconvenience in the future. I highly recommend sharing this article with your HR friend to spare your new employer from incurring any penalties for noncompliance with the new requirements.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Arianne Cyril L. Mandac is a manager of Tax Advisory & Compliance division of P&A Grant Thornton

 

As published in BusinessWorld, dated 06 August 2019