BIR Compromise Penalty for a Withholding Agent's Failure to Withhold or Remit Tax

A withholding agent’s failure to withhold or remit tax carries a BIR compromise penalty from ₱1,000 to ₱25,000, tiered by the amount of tax not withheld or remitted — RMO No. 7-2015’s Annex A prices this as its own line item under NIRC Section 255, distinct from the general late-filing compromise already covered on this site. The underlying criminal exposure is steeper than ordinary late filing: a fine of not less than ₱10,000 and imprisonment of one to ten years.

For the criminal-liability framework this compromise sits beside, see Section 255 Criminal Penalties: Willful Failure to File, Pay, or Withhold Tax; for the government-officer-specific version of this same violation, see Can a Government Accountable Officer Be Compromised for Failing to Withhold or Remit Tax?

What does the BIR charge for failing to withhold or remit tax? #

RMO No. 7-2015’s Annex A prices this Section 255 violation on a scale tied to the amount of tax not withheld or remitted — a narrower, more targeted table than the general late-filing compromise, since it’s keyed to the withholding shortfall itself rather than gross sales.

This is a separate table from the general failure-to-file-or-pay compromise covered in RMO No. 7-2015 Compromise Penalties Explained, which tops out at ₱50,000 for the largest unpaid-tax bracket — the withholding-specific violation caps lower, at ₱25,000, but applies to a narrower, specifically withholding-related shortfall.

Is failing to refund excess withholding treated the same way? #

Yes — failure to refund excess taxes withheld on compensation is a distinct NIRC Section 255 violation, priced on the identical bracket structure, but tiered by the amount of excess withholding not refunded instead of the amount not withheld.

This is the compromise side of the year-end compensation reconciliation employers are already required to run — see How to Compute Withholding Tax on Compensation for the underlying computation an employer gets wrong when this happens.

Worked example: an employer that under-remitted quarterly EWT #

A company withholds the correct amount from a supplier’s professional fee payment during Q2 2026 but, due to a bookkeeping error, remits only part of it — leaving ₱35,000 of the withheld tax unremitted to the BIR by the deadline. Under the Section 255 table, ₱35,000 falls in the ₱20,001–₱50,000 bracket: a ₱10,000 compromise, separate from the deficiency basic tax, surcharge, and interest the company still owes on the unremitted amount itself. This compromise doesn’t replace the obligation to actually remit the ₱35,000 — see Correcting a Wrong ATC or Amount on a Filed BIR Withholding Tax Return for how to fix the underlying remittance return.

Frequently asked questions #

How much is the compromise penalty for a withholding agent who fails to withhold or remit tax? #

Under RMO No. 7-2015’s Annex A, failure to withhold or remit withheld taxes (NIRC Section 255) is compromised on a scale from ₱1,000 (amount not withheld or remitted of ₱5,000 or below) up to ₱25,000 (over ₱1,000,000), based on the amount of tax not withheld or remitted.

Is there a separate penalty for not refunding excess withholding tax on compensation? #

Yes. Failure to refund excess taxes withheld on compensation is a distinct NIRC Section 255 violation, priced on the identical ₱1,000–₱25,000 scale, tiered by the amount of excess withholding taxes not refunded rather than the amount not withheld.

How is this different from the late-filing/non-payment compromise already covered on this site? #

RMO No. 7-2015 Compromise Penalties Explained covers a taxpayer’s general failure to file a return or pay tax on time, which tops out at ₱50,000 for the largest unpaid-tax bracket. The withholding-specific violation covered here is a distinct line item in the same Annex A, keyed to the amount not withheld or remitted specifically, and tops out at ₱25,000.

What criminal penalty applies if this isn’t compromised? #

A fine of not less than ₱10,000 and imprisonment of not less than one year but not more than ten years applies under NIRC Section 255 — a materially steeper criminal exposure than the general late-filing violation, reflecting that a withholding agent is handling tax that was already deducted from someone else’s income and never remitted to the government.

Does this apply to the amount withheld and not remitted, or the amount that should have been withheld but wasn’t? #

The schedule prices both scenarios the same way — the amount of tax not withheld or remitted at the time or times required by law — whether the failure was withholding the wrong (lower) amount in the first place or correctly withholding but not remitting it to the BIR.

Summary #

A withholding agent’s failure to withhold or remit tax carries its own RMO No. 7-2015 compromise table, distinct from the general late-filing schedule — ₱1,000 to ₱25,000, scaled to the amount of tax involved, with an identically structured table for failing to refund excess compensation withholding. Both sit alongside, not instead of, the deficiency tax, surcharge, and interest a withholding agent still owes once a shortfall is caught.