Sep 272015
The withholding tax on, and deductibility of, year-end bonuses to employees are issues that are frequently raised during tax examinations of a company’s books of accounts. Usually, these bonuses are accrued at yearend and deducted for income tax purposes in the year accrued, although the bonus is paid to the individual employee, and the withholding tax deducted and remitted to the Bureau of Internal Revenue (BIR), in the succeeding year. In these situations, the BIR usually questions and disallows the tax deduction claimed by the employer on the ground of non-withholding.