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PERSONAL INCOME TAX

CODAL REFERENCE AND RELATED ISSUANCES

1. Republic Act Nos. 8424, 9337, 9442, 9504, 10963


2. Sections 57 to 58 and 78 to 83 of the National Internal Revenue Code (NIRC)
3. Revenue Regulation Nos. 2-98, 17-2003, 30-2003, 10-2008, 11-2018
4. Revenue Memorandum Circular Nos. 72-2004, 91-2010, 50-2018, 51-2018

IMPORTANCE OF WITHHOLDING TAX SYSTEM

It is considered as an effective tool in the collection of taxes for the following reasons:
It encourages voluntary compliance;
It reduces cost of collection effort;
It prevents delinquencies and revenue loss; and
It prevents dry spell in the fiscal conditions of the government by providing revenues throughout the taxable year.

PERSONS REQUIRED TO WITHHOLD WITHHOLDING TAXES

Individuals engaged in business or practiced of profession


Non-individuals (corporations, associations, partnertship, cooperatives) whether engaged in business or not
Government agencies and its instrumentalities (National Government Agentcies (NGAs), Government-owned or C
Units including Baranggays (LGUs

CLASSIFICATION OF WITHHOLDING TAXES

Creditable withholding tax

a. Compensation - is the tax withheld from income payments to individuals arising from an employer-employee r
b. Expanded - is a kind of withholding tax which is prescribed on certain income payments and is creditable agai
quarter/year in which the particular income was earned.
c. Withholding Tax on GMP - Value Added Taxes (GVAT) - is the tax withheld by National Government Agencie
owned and controlled corporations (GOCCs) and local government units (LGUs), before making any payments to
of their purchases of goods and services.
d. Withholding Tax on Government Money Payments (GMP) - Percentage Taxes - is the tax withheld by Natio
instrumentalities, including government-owned and controlled corporations (GOCCs) and local government units
registered taxpayers/suppliers/payees

Final Withholding Tax is a kind of withholding tax which is prescribed on certain income payments and is not cre
other income subject to regular rates of tax for the taxable year. Income Tax withheld constitutes the full and final
particular income subjected to final withholding tax.

WITHHOLDING TAX ON COMPENSATION

Compensation or Wages - refers to all remuneration for services performed by an employee for his employer unde
by the NIRC and pertinent laws.
KINDS OF COMPENSATION

Regular
a. Basic Salary
b. Fixed allowances

Supplmentary
a. Commission
b. Overtime pay
c. Fees, including directors fees
d. Profit sharing
e. Monetized vacation leave in excess of ten (10) days
f. Sick leave
g. Fringe benefits received by rank and file employees
h. Hazard pay
i. Taxable 13th month pay and other benefits (if more than P90,000)
j. Other remuneration received from an employee-employer relationships

RESPONSIBILITIES OF THE EMPLOYER

Submit the duly accomplished BIR Form Nos. 1902 and/or 1905 to the RDO within thirty (30) days from receipt;
Withhold the tax due from the employees following the prescribed manner;
Remit the amount of tax withheld from the employee within the prescribed due dates;
Do the year-end adjustment;
Submit Annual Information return (BIR Form 1604-C, 1604-F and 1604-E), including the required alphabetical list
the close of the calendar year;
Issue the Certificate of Compensation Payment/Tax Withheld (BIR Form No. 2316) to the employees; and
Refund excess tax withheld.

EXEMPTIONS AND EXCLUSIONS FROM GROSS INCOME

a. Remuneration received as an incident of employment (RA 7641; those with approved reasonable private retirem
GSIS Act of 1937, as amended; and etc.
b. Remuneration paid for agricultural labor;
c. Remuneration for domestic services;
d. Remuneration for casual labor not in the course of an employer's trade or business;
e. Compensation for services by a citizen or a resident of the Philippines for a foreign government or internationa
f. Damages (Actual, moral, exemplary and nominal);
g. Life insurance;
h. Amounts received by the insured as a return of premium;
i. Compensation for injuries or sickness;
j. Income exempt under treaty
k. 13th Month pay and other benefits
l. GSIS, SSS, Medicare and other contributions (employee's share only)
m. Compensation income of minimum wage earners (MWEs) who work in the private sector and being paid the S
Regional Tripartite Wage and Productivity Board (RTWPB)/National Wages Productivity Commission (NWPC), ap
n. Compensation income of employees in the public sector with compensation income of not more the the SMW
NWPC applicable to the place where he/she is assigned.
o. De Minimis benefits
p. Fringe benefits given to employees other than rank and file and subjected to Fringe Benefit Tax (FBT);
q. Personnel Economic Relief Allowance (PERA) given to government employees; and Representation and transp
employees under the General Appropriations Act.

MINIMUM WAGE EARNERS

No withholding tax shall be required on the Statutory Minimum Wage (SMW) of the Minimum Wage earner in the pri
by RR 11-2018, including:
Holiday pay
Overtime pay
Night shift differential
Hazard pay
of Minimum Wage earners in the private/public sectors as defined by these Regulations.

DE MINIMIS BENEFITS NOT SUBJECT TO WITHHOLDING TAX

a. Monetized unused vacation leave credits to employees not exceeding ten (10) days during the year;
b. Monetized value of vacation and sick leave credits paid to government officials and employees;
c. Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester of P25
d. Rice subsidy of P2,000 or one sack of 50kg rice per month amounting to not more than P2,000;
e. Uniform and clothing allowance not exceeding P6,000 per annum;
f. Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs, annual medical/exec
consultations, not exceeding P10,000.00 per annum;
g. Laundry allowance not exceeding P300 per month;
h. Employees achievement awards, e.g. for length of service or safety achievement, which in the form of a tangib
with an annual monetary value not exceeding P10,000 received by the employee under an established written pla
employees;
i. Gifts given during Christmas and major anniversary celebrations not exceeding P5,000 per employee per annum
j. Daily meal allowance for overtime work not exceeding twenty five percent (25%) of the basic minimum wage;

k. Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and productivity incenti
value received from both CBA and productivity incentive schemes combined do not exceed ten thousand pesos (
COMPUTATION

Tax Table Under TRAIN Law


MONTHLY 1 2 3

Compensation Range P20,833 and below P20,833 - P33,332 P33,333 - P66,666

0.00 +20% over P2,500.00 +25% over


Prescribed Withholding Tax 0
P20,833 33,333

Fire Officer 1
Base Pay 29,668.00
Less: Philhealth Contri - 407.93
Pag-Ibig Contri - 100.00
Taxable Income 29,160.07 (29,160.07 x 12 mos = P 349,920.84) thus
Less: Nontaxable Income Bracket - 20,833.00 bracket 1 is used
Net Taxable Income 8,327.07
Multiply by Factor Rate 20%
Monthly Withholding Tax 1,665.41

Senior Fire Officer 4


Base Pay 35,456.00
Less: Philhealth Contri - 487.52
Pag-Ibig Contri - 100.00
Taxable Income 34,868.48 (35,843.52 x 12 mos = P 430,122.24) thus
Less: Nontaxable Income Bracket - 33,333.00 bracket 2 is used
Net Taxable Income 1,535.48
Multiply by Factor Rate 25%
Taxable Income in excess of P33,333.00 383.87
Add: Base Taxable Income Factor 2,500.00
Monthly Withholding Tax 2,883.87
4 5 6

P66,667 - P166,666 P166,667 - P666,666 P666,667 and above

P10,833.33 +30% over P40,833.33 +32% over P200,833.33 +35%


P66,667 P166,667 over P666,667
Personal Income Tax
* Under the Train law, there is a reduction of personal income tax of a majority of individual
taxpayers. Prior to the enactment of the new law, an individual employee or self-employed
taxpayer would normally have to pay income tax at the rate of 5% to 32%, depending on one's
bracket.

* Under Train, an individual with a taxable income of P250,000 or less will now be exempt from
income tax. Those with a taxable income of above P250,000 will be subject to the rate of 20% to
35% effective 2018, and 15% to 35% effective 2023. Moreover, the deductible 13th month pay
and other benefits are now higher at P90,000 compared to P82,000 under the old law.
The table shows the comparison of the brackets and tax rates under the NIRC and Train:

It is to be noted that some items that were previously deducted to arrive at taxable income had
been removed under Train. These are, to wit: and the .

a. the personal exemption of P50,000


b. additional exemption of P25,000 per dependent child (4 children max)
c. premium for health and hospitalization insurance of P2,400 per year
of individual
f-employed
ending on one's

be exempt from
he rate of 20% to
13th month pay
old law.
and Train:

ble income had