Philhealth contribution (table)

Illustration:

Mr. B earns monthly salary of P24,000. How much is the required Pilhhealth contribution of Mr. B?

Solution: Mr. B belongs to Salary Braket No. 17. Therefore, his monthly Philhealth contribution is P 300.

Mr. B’s employer is also required to contribute P 300 on behalf on Mr. B . Therefore, the total amount to be paid
to Philhealth is P 600.00 ( P 300 employer’s share + P 300 Mr. B’s share. However again, only the P 300 contribution of
Mr. B shall be deducted from his monthly salary.

Notice that the employee shoulders half of the total monthly premium while the employer shoulders the other
half. For “Kasambahay” helper receiving a salary of less than P 5, 000.00 per month, the employer shall shoulder both
the employee’s and employer’s shares

Pag-IBIG (HDMF) Contribution Table

Monthly compensation Percentage of monthly compensation

Employee’s share Employer’s share
P 1,500 and below. 1% 1%
Over P 1,500 2% 2%
It should be noted that the maximum monthly compensation allowed for computing an employee’s Pag-IBIG
contribution is P 5,000. This means that the maximum amount an employee can contribute is P100. The employer shall
also contribute another P100 and therefore the total amount to be paid to the Pag-IBIG is P200. Accordingly, the table
above is useful only if the employee earns monthly compensation of below P 5000.

Illustration:

Mr. C has the following monthly compensation.

Basic monthly salary 23,000

Cost of living allowance (COLA) 1,000

TOTAL 24,000

Requirement: compute for Mr. C‘s monthly “take-home pay”, net of SSS, Philhealth, and Pag-IBIG contributions and
monthly withholding tax.

Solution:

Basic monthly salary 23,000

Cost of living allowance (COLA) 1000

Total 24,000

SSS contribution (581.30)

Philhealth contribution (300)

Pag-IBIG(maximum amount) (100)

Net compensation subject to withholding taxes 23,019

Withholding tax (437)

Net pay 22,582

Withholding tax – monthly:

Tax on P 20,833 column 2 of Monthly withholding tax table) 0

Add: Tax on excess [20% x (23,091-20,833)] 437

Withholding tax for the month 437

Passive income

= can be broadly defined as income earned without actively working for it.

=typically subject to final tax

Final tax= means, once the income is taxed, it will not be taxed again, neither does the tax need to be adjusted. It is
computed by multiplying a fixed rate on the income ,rather than subjecting the income to the tax tables provided
earlier. The amount of passive income received by the earner is net of the final tax.

Examples of passive income Final tax rate ( for a resident citizen)

1. Interest income from the bank 20%
2. Interest income from foreign deposit 15%
3. Royalties, except on books ,as well as other literary 10%
works and musical compositions
4. Prizes and winnings exceeding P 10,000 20%
Notes :
a. Prizes amounting to P 10,000 or less are included
in income subject to the tax tables provided
earlier.
b. Winnings from PCSO and Lotto amounting to P
10,000 or less are except.
5. Cash or property dividends received by an 10%
individual from a domestic corporation.
6. A partner’s shar in he after-tax profit of a 10%
partnership (except a general professional
partnership)
Illustration 1: Mr. A , a resident citizen, earns the following passive incomes, gross of final taxes:

Interest income from a peso bank deposit 1,000

Royalties from invention 1,000,000

Prize won on a singing contest 200,000

Winnings from Lotto 500,000

Cash dividends from a domestic corporation 40,000

Requirement: Compute for the net amount received from the passive incomes earned .

Passive income Amount Final tax rate Final rate

Interest income 1,000 20% 200

Royalties from invention 1,000,000 10% 100,000

Prize won on singing contest 200,000 20% 40,000

Winnings from LOTTO 500,000 20% 100,000

Cash dividends 40,000 10% 4,000

Totals 1,741,000 244,200

Total passive income, gross of final tax 1,741,000

Less: Total final tax (244,200)

Net amount received 1,496,800

Illustration 2: The following is an excerpt from a passbook of a peso savings deposit with a bank . Analyze how the final
tax is computed on the interest income.

(PICTURE)

Business Taxation

Annual registration

Businesses are required to pay an annual registration fee of P 500 for every separate place of business on or before
January 31 of the current year. This is done through BIR Form NO. 0605 (Payment Form)

The following are also required from a business:

1. Registration og Books of Accounts

 2. Application for Authority to Print Receipts and Invoices.
3. Application for Authority to Use Computerized Accounting Systems.
4. Application for Permit to Use CRM (cash register machine) and point-ofsale (POS ) machine.

Aside from the annual payments to BIR , businesses are also required to pay annual taxes and fees to the local
government, which include, but not limited to , the following :
a. Business permit / Mayor’s permt , including business tax
b. Fire safety inspection certificate fee
c. Sanitary inspection certificate fee
d. Garbage collection fee
e. Barangay clearance/ permit

BUSINESS TAXES

= it is a tax on the production, sale, or consumption of goods and services, leasing of property , or other business
activities. Business taxes are classified into the following:

1. Value-added tax (VAT)

2. Percentage tax
3. Excise tax

Value-added tax/ VAT- is imposed on “any person who, in the ordinary course of business ,sells, barters,
exchangs, leases goods or properties , renders services, and any person who imports goods.”

Characteristics of VAT:

a. It is a consumption tax- A tax imposed on the consumption of goods or services in the Philppines, including
importation of goods
b. It is a form of sales tax – the tax is based on the sale price.
c. It is an indirect tax- it can be shifted or passed on to the buyer.

A business is required to pay VAT if:

a. It is VAT-registered; or
b. It has annual total sales or receipts that exceed Three Million Pesos ( P 3,000.000)
c. There are reasonable grounds to believe that iits annual total sales or receipts will exceed P 3,000,000

Those who elected to be taxed at the optional 8% tax are not allowed to register as VAT- payer. VAT is normally
computed as 12% of the gross selling price of the good service. This is called output VAT .

Before paying the output VAT to the BIR , the VAT-registered business is allowed to deduct an input VAT,,
computed as 12% of purchases or payments to other VAT-registered businesses. These are exemplified below:

VAT

Sale price to customer ( P 10,000) Output (P 10,000 x 12% ) 1,200

Purchase price from supplier ( P 6,000) Input (P 6,000 x 12%) (720)

Net VAT to be remitted to the BIR 480

ILLUSTRATION 1.Input and Output VAT

Sunflower Convenience Store, a sole proprietorship and a VAT-registered business, has the following transactions during
the month:

Sale of goods, exclusive of VAT 450,000

Purchases of goods, exclusive of VAT 230,000

REQUIREMENTS:

A. Provide the journal entries

B. Compute for the net amount of VAT to be remitted to the BIR.

Solutions:

Requirement (a):

Date Cash( 450,000 + 54,000 VAT) 504,000

Sales 450,000
Output VAT (450,000 X 12%) 54,000
Date Purchases 230,000
Input VAT (230,000 X 12%) 27,600
Cash (230,000+ 27,600 VAT) 257,600

Notes:

-The amount credited/ debited to the sales/purchases accounts are exclave of their VAT components.

- The VAT component of sales is recorded in the “Output VAT” account while the VAT component of purchases is
recorded in the “Input VAT” account.