Is The Higher Between
Is The Higher Between
Is The Higher Between
1. As to function
Managerial employees
Supervisory employees
Rank & file employees
2. As to taxability
Minimum wage earners – exempt from taxation, unless their other taxable income exceeds
₱250k
Statutory minimum wage – is the higher between:
a. the rate fixed by the Regional Tripartite Wage and Productivity Board of the DOLE or
b. ₱5,000/month or ₱60,000/year
Note: This rule shall also apply if the employee transfers to an employer paying salary
at the minimum wage or transfers to a region with higher minimum wage
Note: This rule shall also apply if the employee transfers to an employer paying salary
above the minimum wage or transfers to a region with lower minimum wage
Regular employees (includes special aliens)– subject to the regular individual progressive tax
Note: These items do not form part of the compensation income of the employee,
thus, these benefits are exempt because these items are not benefits but rather
mere advances and replenishments of supposed to be direct cash outflows from
the employer, but, in the perspective of employer, these are items of allowable
deductions as business expenses.
Note: These items do not form part of the compensation income of the employee,
thus, these benefits are exempt. Unless such benefit is unreasonably excessive
(hybrid expenses), hence, it is taxable fringe benefit.
Computation procedure
1. Determine the total regular monetary & non-monetary compensation, segregating non-taxable
benefits, mandatory contributions and supplemental compensation
2. Identify the bracket that applies in no.1 for the basic tax and the incremental tax rate (p. 343)
3. Add supplemental compensation to the excess of the regular compensation from the
compensation range and multiply the sum to the incremental tax rate
4. Add the basic tax and incremental tax
Year-end tax adjustment – annual tax due may not equal the total withholding tax
1. Under-withholding – shall be deducted on the final payroll of the employee for the taxable year
2. Over-withholding – shall be refunded to the employee
Benefits not subject to withholding tax on compensation – items below are not considered
compensation income, hence, they are exempt from withholding
1. Remunerations received as incidents of employment
2. Remuneration paid for agricultural labor and paid entirely in products of the farm where the
labor is performed
3. Remuneration for domestic services
4. Remuneration for casual labor not in the ordinary course of an employer’s trade or business –
treated as other income
5. Compensation for services by a citizen or resident of the Philippines for a foreign govt. or an
international organization – still taxable as compensation income but is exempt from
withholding
6. Damages paid by employer to employees
7. Proceeds of life insurance
8. Amounts received by an insured employee as a return of premium
9. Compensation for injury and sickness
10. Income exempt under treaty
11. 13th month pay and other benefits not exceeding ₱90k
12. GSIS, SSS, Philhealth, union dues, & other contributions
13. Compensation income of minimum wage earners, including:
Holiday pay
Hazard pay
Overtime pay
Night shift differential pay
14. Compensation income of employees in the public sector if the same does not exceed those of
minimum wage earners in the non-agricultural sector
Note: The employer shall furnish each employee-taxpayer a copy of BIR Form 2316 or the
“Certificate of Compensation Payment or Income Tax Withheld” on or before January 31 of the
succeeding year.