For businesses and financial institutions in the Philippines, BIR Form 1602 plays a crucial role in remitting taxes withheld from interest payments and other financial products, such as deposit substitutes and trust fund income. This form helps ensure tax compliance related to income payments that are subject to final withholding tax.
In this blog post, we will walk through what BIR Form 1602 is, who needs to file it, when it should be filed, and how to do so accurately.
What Is BIR Form 1602?
BIR Form 1602 is the Monthly Remittance Return of Final Income Taxes Withheld on Interest Paid on Deposits and Yield on Deposits Substitutes, Trusts, and Similar Instruments.
This form is used by businesses and financial institutions that are required to withhold final income taxes on interest payments, yields, and income from various financial products. This includes:
Interest on bank deposits (e.g., savings or time deposits)
Yield on deposit substitutes
Interest on trust funds
Other similar financial instruments
The tax withheld is considered final, meaning the recipient of the income (whether an individual or business) is not required to file a separate income tax return for the interest or yield.
Who Needs to File BIR Form 1602?
BIR Form 1602 must be filed by businesses and financial institutions that make the following types of payments and are required to withhold final taxes:
Banks, savings institutions, and other financial institutions that pay interest on deposits.
Companies paying income on deposit substitutes or similar financial instruments.
Trust funds or other similar entities making payments subject to final withholding tax.
In short, any entity that makes interest payments on deposits or similar instruments and is required to withhold a final tax must file this form.
What Types of Income Are Subject to Final Withholding Tax?
BIR Form 1602 is specifically used for payments subject to final withholding tax. These payments include:
Interest on deposits: Interest paid on savings accounts, time deposits, and other bank deposits.
Interest on deposit substitutes: Payments made on securities, bonds, or instruments that substitute for deposits, such as certificates of deposit or other financial instruments.
Income from trust funds: Payments made to beneficiaries of trust funds, where income is generated by assets held in trust.
When Should You File BIR Form 1602?
Due Date: Form 1602 is due on or before the 10th day of the month following the month in which the interest or yield was paid.
For example, if interest payments are made in April, the form must be filed and the taxes remitted by May 10.
Note: If the due date falls on a weekend or holiday, the filing and payment due date will be moved to the next working day.
How to File BIR Form 1602
There are different ways to file BIR Form 1602, depending on your status as a taxpayer.
1. eFPS (Electronic Filing and Payment System)
Large taxpayers and certain businesses required to file electronically will use the eFPS system to file and remit their taxes.
This system is efficient for both filing and payment of taxes and ensures real-time submission.
2. eBIRForms
For smaller taxpayers or those who are not required to use eFPS, you can file Form 1602 via the eBIRForms system.
After completing the form, print it out and submit the tax payment at an Authorized Agent Bank (AAB) or use an online payment portal like GCash, Maya, or UnionBank for payment.
3. Manual Filing (if allowed)
In some cases, manual filing is still permitted. This would involve submitting the completed form and payment directly to the designated Revenue District Office (RDO).
Key Fields in BIR Form 1602
Some of the important fields in BIR Form 1602 that need to be accurately filled out include:
TIN and RDO Code: Your taxpayer identification number (TIN) and the code for your specific Revenue District Office (RDO).
Return Period: The month the interest or yield was paid (e.g., 04/2025 for April 2025).
Tax Type: Indicate the withholding tax rate applicable to the interest or yield payment.
Amount of Interest/Yield Paid: Report the total amount of interest or yield subject to withholding.
Tax Withheld: This is the amount of tax you have withheld based on the applicable final withholding tax rate.
Amount Payable: This is the final amount that needs to be remitted to the BIR.
Common Mistakes to Avoid
Late Filing: Ensure that you file on time to avoid penalties and surcharges. Filing late could also lead to interest charges.
Incorrect Tax Rates: Ensure that you are applying the correct final withholding tax rate for the type of income (e.g., interest on deposits, yields on deposit substitutes).
Missing Payment: You must both file the form and remit the payment by the due date to avoid penalties.
Errors in Taxpayer Details: Double-check that your TIN, RDO code, and other taxpayer details are accurate.
Final Thoughts
BIR Form 1602 is an essential compliance tool for businesses and financial institutions that pay interest on deposits or similar instruments. By properly withholding and remitting taxes through this form, you ensure that you meet your obligations under the final withholding tax system.
Whether you’re running a bank, a financial institution, or another business that makes such payments, staying up to date with BIR Form 1602 helps avoid penalties and contributes to the smooth functioning of the tax system.
If you need help understanding the final withholding tax rates or have questions about filling out the form, consider consulting with a tax professional or accountant.
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