For withholding tax on compensation to apply, you must first establish the fact that there is an employer-employee relationship between the payor and the payee. In its absence other tax type may apply such as expanded withholding taxes or final withholding tax.
If you are an employee, withholding tax on compensation applies at the rate of 15-32%.
If you are an independent contractor, then expanded withholding tax will apply at 10%/15% if services rendered refer to a professional service, or 2% if prime contractor.
If you are a non-resident alien and services were rendered in the Philippines, then 25% final withholding tax will apply.
Now, under the Labor Code, the following are the elements of employer-employee relationship:
1. Selection and hiring of the employees by the employer;
2. Payment of wages by the employer at agreed intervals and basis - hourly, daily, weekly, monthly, by piecework, or at any reasonable basis;
3. Power of dismissal by the employer under established criteria and upon valid grounds; and
4. Power of control of the employer as to the means and methods of doing the work.
Absence of any of the 4 elements (four-fold test), there can be no such employer-employee relationship and you cannot apply withholding tax on compensation.
On the other hand, under Section 2.78.3 of BIR Revenue Regulation 2-98, as amended, employer-employee relationship is establish under the following criteria: (a) has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which the result is accomplished; (b) has the right to dismiss; and (c) furnishes the tools and place of work.
The foregoing is in addition to existing jurisprudence for guidance in determining the worker’s employment status.
Why do we need to know this? Because there may be deficiencies or excesses in the withholding of appropriate taxes which may be subject to penalties in case of deficiency or refund in case of excess payments.
Based from your facts, since you were issued the Certificate of Creditable Tax Withheld at Source then you are taxed under expanded withholding tax. However, there seems to be a discrepancy on the tax rate applied. It should either be 10%, 15%, or 2% depending on what type of services rendered as mentioned above.
You should clear this up to the HR or Finance/Accounting Department. What is the 3% for? And why are they withholding 3% from your salary when they only report 10%? It's better if you will have your query written and duly received by the concerned department. State legal basis and if they can't explain what is the 3% for or if explained but still you reckon that the deduction is not allowed by law hence illegal, then demand a refund as this constitute an unauthorized deduction pursuant to Article 113 to 115 of the Labor Code as amended and Sections 9 to 11 Rule VIII of the Implementing Rules of Book III of the Labor Code.