WITHHOLDING TAX ON

COMPENSATION

 tax withheld from individuals

receiving compensation for
services rendered in the
Philippines
LEGAL BASIS:

Republic Act No. 9504

An Act Amending Sections
22,24,34,35,51and 79 of RA
8424, as Amended Otherwise
Known as The National Internal
Revenue id 1997”
 KINDS OF COMPENSATION
1. REGULAR COMPENSATION
 Basic Salary
 Fixed Allowances

2. SUPPLEMENTARY COMPENSATION
 Bonuses
 Productivity Enhancement Incentive
 Cash Gift
 Paid vacation leave and sick leave
 Other Fringe Benefits
EXEMPTIONS FROM
1. Compensation Income of Minimum Wage Earners
(MWEs) including holiday pay, overtime pay, night shift
differential and hazard pay
2. Personal Economic Relief Allowance (PERA) – P2,000.00
3. Representation and Transportation Allowance (RATA)
4. Retirement gratuity and benefits
5. Employee share contribution to GSIS, PHIC,
HDMF and Union Dues
6. Bonuses and Other Benefits not exceeding the
P82,000.00 ceiling
 Mid Year Bonus
 Year End Bonus
 Other Fringe Benefits
7. De Minimis Benefits
7. De Minimis Benefits
 privileges that are of relatively small and are
offered by employer merely as means of
promoting health, goodwill, contentment, or
efficiency of employees
 Legal Basis: Revenue Regulations No. 1-2015
7. De Minimis Benefits
 Monetized value of vacation and sick leave credits
paid to government employees
 Uniform and Clothing Allowance not exceeding
P5,000.00 per annum
 Gifts given during Christmas and major
anniversary celebrations not exceeding
P5,000.00 per annum
7. De Minimis Benefits
 Benefits by virtue of a collective bargaining
agreement (CBA) and productivity incentive
schemes provided that the combined total monetary
value of both CBA and productivity incentive schemes
do not exceed P10,000.00 per taxable year.
 Collective Negotiation Agreement (CNA)
 Performance Based Bonus (PBB) and
 Productivity Enhancement Incentive (PEI)
7. De Minimis Benefits
RULES ON TAX IMPOSITION
De Minimis benefits NOT EXCEEDING Exempted in full
the threshold
De Minimis benefits EXCEEDING the
threshold
 Up to the threshold Exempted in full
 In excess of the threshold To form part of P82,000
ceiling
 In excess of P82,000 taxable
 LEGAL BASIS: RA 9504
PERSONAL EXEMPTION
 Single
 Head of the Family P 50,000.00
 Married
ADDITIONAL EXEMPTION
For each qualified dependent child
up to maximum of FOUR (4) qualified
dependent children P 25,000.00
(Husband is the proper claimant)
 RULES ON CLAIM FOR PERSONAL AND ADDITIONAL
EXEMPTIONS
If the taxpayer dies during the taxable year, his estate may still claim
the personal and additional exemptions for himself and his
dependent(s) as if he died at the close of such year.
If the spouse or any of the dependents
 dies,
 got married,
 becomes twenty-one (21) years old
 becomes gainfully employed during the taxable year
Full exemption for the year can still be claimed
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000
PERA 24,000 (Non Taxable)
GSIS, PHIC, HDMF and Union Dues 32,000 (Deductible from Basic Salary – non taxable)
Other Benefits (P82,000 ceiling): Amount Non Taxable Taxable
Mid Year Bonus 82,000 less 30,000 30,000 -
60,000 = 22,000
Gifts given during
Year End Bonus 30,000 30,000 -
excessand
Christmas
TOTAL major anniversary 60,000 60,000 -
De Minimis Benefits: celebrations not Amount Non Taxable Taxable
exceeding
Cash Gift 5,000 5,000 -
P5,000.00 per
PEI annum 5,000 5,000 -
CNA 10,000 5,000 5,000
PBB 35,000 22,000 (82K ceiling) 13,000
TOTAL 55,000 37,000 18,000
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000
PERA 24,000 (Non Taxable)
GSIS, PHIC, HDMF and Union Dues 32,000 (Deductible from Basic Salary – non taxable)
Other Benefits (P82,000 ceiling): Amount Non Taxable Taxable
Mid Year Bonus 30,000 30,000 -
Year End Bonus 30,000 30,000 -
TOTAL 60,000 60,000 -
De Minimis Benefits: total monetary value Amount Non Taxable Taxable
Cash Gift received from both 5,000 5,000 -
PEI CBA and productivity 5,000 5,000 -
incentive schemes
CNA combined do not 10,000 5,000 5,000
PBB exceed 35,000 22,000 (82K ceiling) 13,000
TOTAL P10,000.00 55,000 37,000 18,000
 RULES ON TAX IMPOSITION – DE MINIMIS BENEFITS

De Minimis benefits
JUANNOT EXCEEDING
DELA the threshold
CRUZ received Exempted
the following compensation for the year: in full
Annual Basic
De Minimis Salary EXCEEDING the threshold
benefits 360,000
PERA 24,000 (Non Taxable)
 Up to the threshold Exempted in full
GSIS, PHIC, HDMF and Union Dues 32,000 (Deductible from Basic Salary – non taxable)
Other
In Benefits
excess(P82,000
of the ceiling):
threshold Amount
To form part of P82,000
Non Taxable
ceiling
Taxable
 In
Midexcess
Year Bonus
of P82,000 30,000 30,000
taxable -
totalYear End Bonus
monetary 30,000 incentive schemes
value received from both CBA and productivity combined do not-
30,000
TOTAL exceed P10,000.00
60,000 60,000 -
De Minimis Benefits: Total 50,000 Amount Non Taxable Taxable
Less: De Minimis 10,000
Cash Gift 5,000 5,000 -
threshold
PEI Excess 40,000 5,000 5,000 -
CNA Less: excess from 22,000 10,000 5,000 5,000
PBB P82,000 ceiling 35,000 22,000 (82K ceiling) 13,000
TOTAL Taxable 18,000 55,000 37,000 18,000
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000
PERA 24,000 (Non Taxable)
GSIS, PHIC, HDMF and Union Dues 32,000 (Deductible from Basic Salary – non taxable)
Other Benefits (P82,000 ceiling): Amount Non Taxable Taxable
Mid Year Bonus 82,000 less 30,000 30,000 -
60,000 = 22,000
Year End Bonus 30,000 30,000 -
excess
TOTAL 60,000 60,000 -
De Minimis Benefits: Total 50,000 Amount Non Taxable Taxable
Less: De Minimis 10,000
Cash Gift 5,000 5,000 -
threshold
PEI Excess 40,000 5,000 5,000 -
CNA Less: excess from 22,000 10,000 5,000 5,000
PBB P82,000 ceiling 35,000 22,000 (82K ceiling) 13,000
TOTAL Taxable 18,000 55,000 37,000 18,000
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000
PERA 24,000 (Non Taxable)
GSIS, PHIC, HDMF and Union Dues 32,000 (Deductible from Basic Salary – non taxable)
Other Benefits (P82,000 ceiling): Amount Non Taxable Taxable
Mid Year Bonus 82,000 less 30,000 30,000 -
60,000 = 22,000
Year End Bonus 30,000 30,000 -
excess
TOTAL 60,000 60,000 -
De Minimis Benefits: Total 50,000 Amount Non Taxable Taxable
Less: De Minimis 10,000
Cash Gift 5,000 5,000 -
threshold
PEI Excess 40,000 5,000 5,000 -
CNA Less: excess from 22,000 10,000 5,000 5,000
PBB P82,000 ceiling 35,000 22,000 (82K ceiling) 13,000
TOTAL Taxable 18,000 55,000 37,000 18,000
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000 COMPUTATION
PERA 24,000 (Non Taxable) Annual Basic Salary 360,000
GSIS, PHIC, HDMF and Union 32,000 (Deductible from Basic
Dues Salary – non taxable)
Add: Other Benefits 60,000
Other Benefits (P82,000 Amount Non Taxable Taxable De Minimis Benefits 55,000
ceiling):
Gross Compensation 475,000
Mid Year Bonus 30,000 30,000 -
Income
Year End Bonus 30,000 30,000 -
TOTAL 60,000 60,000 -
Less: GSIS, PHIC, HDMF 32,000
De Minimis Benefits: Amount Non Taxable Taxable
and Union Dues
Cash Gift 5,000 5,000 - Non Taxable Benefits 97,000
PEI 5,000 5,000 - Total Taxable 346,000
CNA 10,000 5,000 5,000 Compensation Income
PBB 35,000 22,000 13,000
TOTAL 55,000 37,000 18,000
 JUAN DELA CRUZ received the following compensation for the year:
Annual Basic Salary 360,000 COMPUTATION
PERA 24,000 (Non Taxable) Annual Basic Salary 360,000
GSIS, PHIC, HDMF and Union 32,000 (Deductible from Basic
Dues Salary – non taxable)
Add: Other Benefits 60,000
Other Benefits (P82,000 Amount Non Taxable Taxable De Minimis Benefits 55,000
ceiling):
Gross Compensation 475,000
Mid Year Bonus 30,000 30,000 -
Income
Year End Bonus 30,000 30,000 -
TOTAL 60,000 60,000 -
Less: GSIS, PHIC, HDMF 32,000
De Minimis Benefits: Amount Non Taxable Taxable
and Union Dues
Cash Gift 5,000 5,000 - Non Taxable Benefits 97,000
PEI 5,000 5,000 - Total Taxable 346,000
CNA 10,000 5,000 5,000 Compensation Income
PBB 35,000 22,000 13,000
TOTAL 55,000 37,000 18,000
 JUAN DELA CRUZ is married with TWO (2) qualified dependent children

COMPUTATION

Annual Basic Salary 360,000

Add: Other Benefits 60,000
De Minimis Benefits 55,000
Gross Compensation Income 475,000
Less: GSIS, PHIC, HDMF and Union Dues 32,000
Non Taxable Benefits 97,000
Total Taxable Compensation Income 346,000
Less: Personal Exemption 50,000
Additional Exemption (2 x 25,000) 50,000
Net Taxable Compensation 246,000
 JUAN DELA CRUZ is married with TWO (2) qualified dependent children

COMPUTATION
But not of Excess
Over Amount Rate
Net Taxable Compensation 246,000 Over Over

not over 10,000 5%

10,000 30,000 500 + 10% 10,000

30,000 70,000 2,500 + 15% 30,000

70,000 140,000 8,500 + 20% 70,000

140,000 250,000 22,500 + 30% 140,000

250,000 500,000 50,000 + 30% 250,000

500,000 over 125,000 + 32% 500,000

 JUAN DELA CRUZ is married with TWO (2) qualified dependent children

COMPUTATION
But not of Excess
Over Amount Rate
Net Taxable Compensation 246,000 Over Over

not over 10,000 5%

For the first P140,000.00, tax is 22,500
10,000 30,000 500 + 10% 10,000
Add: 30% of excess over 140,000 31,800
30,000 70,000 2,500 + 15% 30,000
(246,000 – 140,000) X 30%
TOTAL TAX DUE for the YEAR 54,300 70,000 140,000 8,500 + 20% 70,000

Less: Tax Withheld for the year 56,500 140,000 250,000 22,500 + 30% 140,000
TAX REFUND 2,200 250,000 500,000 50,000 + 30% 250,000

500,000 over 125,000 + 32% 500,000

 total tax collected for the
Tax Collectible: If total tax due > year
total tax collected for the
Tax Refund: If total tax due < year
total tax collected for the
Break even: If total tax due = year