Every employee, from whose emolument tax is deductible, is required to provide his employer with a Tax Code. The employer shall record and utilize that tax code in order to determine the amount of tax to be deducted in accordance with the Tax Deduction Tables. The Tax Code is based on the declaration made by the employee on the Tax Declaration Form (TD-AU-1).
DECLARATION OF DEDUCTIONS AND ALLOWANCES
A TD Form AU-1 (Code Form) is the prescribed form on which claims are declared. It was designed solely for the purpose of making the appropriate deduction of tax from salary or wages. After the Declaration is made the employee will be issued with a Tax Code Number.
Since this information is necessary for the correct amount of tax to be deducted, each employee, on taking up employment, is required by Law to file a declaration of his deductions and allowances with the Department:
· Within fourteen (14) days from the commencement of employment;
· Within seven (7) days, if there is a change in tax deductions/allowances;
· When required to do so by the Inland Revenue Department.
If an employee has more than one place of employment or is in receipt of both pension and salary or wages, details of each source of income must be stated separately on the same form. Also, in such cases, a Code Number must be submitted to each employer by that employee.
In cases where an employee fails to submit a tax code number, the employer must deduct taxes using the basic tax code—184M. This means that the tax deducted will be in excess of the amount which would normally have been deducted if a declaration had been filed. It should be noted, however, that the Department does not encourage this practice.