REVENUE REGULATIONS NO. 1-2006 issued on January 5, 2006 amends Sections 2.78.1(B), 2.79(A) and (F), 2.83.4(C) and 2.83.5 of Revenue Regulations (RR) No. 2-98, as amended, with respect to the withholding of Income Tax on compensation income received by minimum wage earners. The compensation income of individuals that do not exceed the statutory minimum wage or P 5,000.00 per month (P 60,000.00 a year), whichever is higher and of employees of the government of the Philippines, or any of its political subdivisions, agencies or instrumentalities, with Salary Grades (SGs) 1 to 3 are exempted from the requirement of withholding tax on compensation. The said individuals whose compensation income is not subject to Withholding Tax shall remain liable for Income Taxes and shall continue to file their annual Income Tax returns and pay the Income Taxes due thereon, if any, not later than April 15 of the year immediately following the taxable year. Said individuals are also not qualified for substituted filing and, therefore, still required to file BIR Form NO. 1700 in accordance with existing Regulations. The compensation income where no Income Taxes were withheld shall be allowed as a deduction from an employer’s gross income when the required employees withholding statement (BIR Form No. 2316) have been issued to subject employees. Provided, further, that the alphabetical list of the subject employees shall be submitted under schedule 7.2 of BIR Form No. 1604-CF. Every person who makes payment or expects to make payment of compensation in an amount exceeding the statutory minimum wage or P 60,000.00 a year (P 5,000.00 monthly), whichever is higher, to any single employee shall register by filing, in duplicate, with the Revenue District Office (RDO) of the City or Municipality where his legal residence or place of business is located an Application for Registration as a withholding agent using the form prescribed by the Bureau not later than 10 days after becoming an employer. These Regulations shall take effect on January 1, 2006.