06-02-2019, 12:03 PM
Back wages, allowances and benefits received by an employee from a labor dispute constitute remunerations for services by the employee during the period of his dismissal from service;
these remunerations are subject to income tax, and consequently, to withholding tax.
For income tax and withholding purposes, the employee is required to report as income and pay the corresponding income taxes by allocating or spreading the back wages, allowances and benefits
through the years from his separation up to the final decision of the court awarding the back wages.
However, in cases where the back wages, allowances and benefits awarded in the labor dispute are enforced through garnishment of debts due to the employer, the person owing such debts or having possession or control of such credits (e.g., banks, financial institutions or other concerned institutions) who will release and pay the entire garnished amount to the employee shall be constituted as withholding agent responsible for deducting and collecting the withholding tax due on such wages. The prescribed withholding tax is 5% of the portion of the judgment award representing the taxable back wages,
allowances and other benefits received by the employee. (Revenue Memorandum Circular No. 39, 2012,
August 6, 2012)
these remunerations are subject to income tax, and consequently, to withholding tax.
For income tax and withholding purposes, the employee is required to report as income and pay the corresponding income taxes by allocating or spreading the back wages, allowances and benefits
through the years from his separation up to the final decision of the court awarding the back wages.
However, in cases where the back wages, allowances and benefits awarded in the labor dispute are enforced through garnishment of debts due to the employer, the person owing such debts or having possession or control of such credits (e.g., banks, financial institutions or other concerned institutions) who will release and pay the entire garnished amount to the employee shall be constituted as withholding agent responsible for deducting and collecting the withholding tax due on such wages. The prescribed withholding tax is 5% of the portion of the judgment award representing the taxable back wages,
allowances and other benefits received by the employee. (Revenue Memorandum Circular No. 39, 2012,
August 6, 2012)