REVENUE MEMORANDUM CIRCULAR NO. 116-2019 issued on November 6, 2019 clarifies the tax treatment of the income earned by alien individuals employed in the Philippines by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies, Offshore Banking Units and Petroleum Service Contractors and Subcontractors pursuant to Section 4.C of Revenue Regulations (RR) No. 8-2018.

The respective incomes of the alien individuals employed by the said entities are now similarly taxed as income of regular employees of locally-established entities. Accordingly, these alien individuals are subject to the same administrative requirements of the BIR being imposed on other regular employees, such as the substituted filing, issuance of BIR Form No. 2316, inclusion in the Monthly Withholding Tax Remittance on Compensation, as well as in the prescribed
Alphalists, etc.

Alien individuals who are employed by foreign principals and who are assigned to render services exclusively to these local entities (otherwise known as “seconded employees or secondees”), are likewise subject to the regular Income Tax rates. It is grounded on the principle of situs of taxation considering that the services rendered by these alien individuals are being performed within the Philippines, regardless of whether their salaries are being paid by the foreign principals or advanced by these local entities.

The local entities, to whom the “seconded employees” render their services, shall comply with the same administrative requirements, except for substituted filing, imposed by the BIR for regular employees. In addition to these prescribed requirements, the following procedures shall be complied with by all concerned:
a. A separate employment status and description for “seconded employees” shall be provided in the “Current Employment Status” of the Alphabetical List of Employees/Payees from Whom Taxes Were Withheld under BIR Form No. 1604C, as well as in the Alphalist Data Entry and Validation Module version 6.1.
b. These “seconded employees” shall file their annual Income Tax Return and pay the Income Tax due, if applicable, on or before the prescribed deadline of April 15 of each year, together with the attached BIR Form No. 2316 duly issued by the local entities.
c. In all copies of BIR Form No. 2316 to be issued to these employees, the phrase “For Seconded Employee” shall be typed or printed in bold capital letters enclosed in open and close parenthesis immediately under the form’s title “Certificate of Compensation Payment/Tax Withheld”.
d. In case of termination of their services before the end of the taxable year, the local entities shall ensure that the Withholding Tax on their last salaries shall be computed using the annualized Withholding Tax method, pursuant to the provisions of Sec. 2.29.(B).(5).(b) of RR No. 2-98, as amended.