OCA CIRCULAR NO. 36-2003, March 25, 2003

The Bureau of Internal Revenue is implementing a “hassle-free”
method of filing Income Tax Return. This method of filing considers the
employee’s Annual Information Return (BIR Form No. 1604CF) as the
substitute income tax return filed by an employee since it contains the
same information as that found in the income tax return ordinarily
filed.

Under “Substituted Filing”, an individual taxpayer although required
under the law to file his income tax return, will no longer have to
personally file his own income tax return but instead the employer’s
annual information return filed will be considered as the substitute
income tax return of the employee.

The following circumstances must be present in order that substituted filing may apply:

1. The employee receives purely compensation income during the taxable year;
2. The employee receives the income only from one employer in the Philippines during the taxable year;
3. The amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer;
4. The employee’s spouse also complies with all three (3) conditions stated above;
5. The employers files the annual information return (BIR Form No. 1604-CF);
6. The employer issues BIR Form No. 2316 (Oct. 2002 ENCS) version to each employee.

The substituted filing is made mandatory under Revenue Regulations
3-2002 for income/compensation earned starting taxable year 2002. Thus,
employees who qualify for substituted filing for taxable year 2002 and
beyond will no longer file BIR Form 1700 on or before every 15 th of
April.

For the information and guidance of all concerned officials and personnel of the Lower Courts.

March 25, 2003