1. TAX UPDATES:. Withholding tax on. compensation
TAX UPDATES: Withholding tax on compensation (Revenue Regulation )
Department of Health
May 7, 2015
By: Andy B. Bisares
Revenue Officer III - Assessment
RDO 31, Sta. Cruz, Manila

2. TOPIC OUTLINE Introduction Overview on Withholding Tax on Compensation
Latest Amendments
TOPIC OUTLINE

3. PART i introduction

4. “In this world, nothing is certain but DEATH and TAXES.
Benjamin Franklin
INTRODUCTION

5. “TAXES are the single largest expense in a person’s lifetime.”
Robert Kiyosaki
INTRODUCTION

6. INTRODUCTION Business Owner You own a SYSTEM Self-employed Investor
ACTIVE INCOME
PASSIVE INCOME
Cashflow
Quadrant
Employee
You have a J.O.B.
5% - 32%
Time = Money
Business Owner You own a SYSTEM
0% - 30%
People works with you = Money
Self-employed
You own a J.O.B.
Investor
You own INVESTMENTS
5% – 20%
Your money works for you = Money
INTRODUCTION

7. PART iI OVERVIEW ON WITHHOLDING TAX

8. Overview on Withholding tax
A system designed to effectively collect taxes.
It encourages voluntary compliance
It reduces cost of collection effort
It prevents delinquencies and revenue loss
It prevents dry spell in the fiscal condition of the government by providing revenues throughout the taxable year
Overview on Withholding tax

9. Overview on Withholding tax
Types of Withholding Taxes:
Withholding Tax on Compensation
Expanded Withholding Tax
Final Withholding Tax
Withholding Tax on Government Money Payments
Overview on Withholding tax

10. Overview on Withholding tax
Withholding Tax on Compensation
Compensation or Wages – means all remuneration for services performed by an employee for his employer under an employer-employee relationship unless exempted by the Code
Overview on Withholding tax

11. Overview on Withholding tax
Compensation includes:
Salaries and wages
Emoluments
Honoraria
Allowances
Commissions
Director’s fees if at the same time an employee
Taxable bonuses and fringe benefits unless subject to Fringe Benefit Tax
Taxable pensions and retirement pay
Other income of similar nature
Overview on Withholding tax

12. Overview on Withholding tax
Other Considerations on Compensation:
Compensation paid in kind
Living quarters and meals
De Minimis Benefits
Tips and Gratuities
Pensions, retirement and separation pay
Transpo, representation & other allowances (RATA, PERA & ACA)
Vacation and sick leave allowances
Deductions made by employer from compensation of employees
Remuneration for services as employee of a non-resident alien.
Compensation for services performed outside the Philippines
Overview on Withholding tax

13. Overview on Withholding tax
Exemptions from Withholding Tax on Compensation
Remuneration received as an incident of employment (Retirement benefits received under RA 7641)
Remuneration paid for agricultural labor (Sakada)
Remuneration paid for domestic services (Katulong)
Remuneration for casual labor not in the course of an employee’s trade or business (Casual employees in the government)
Overview on Withholding tax

14. Overview on Withholding tax
Exemptions from Withholding Tax on Compensation
Compensation for services by a citizen or resident of the Philippines for a foreign government or International organization
Damages (Actual, Moral, Exemplary and Nominal)
Life Insurance
Amounts received by the insured as a return of premium
Income exempt under treaty
Overview on Withholding tax

15. Overview on Withholding tax
Exemptions from Withholding Tax on Compensation
GSIS, SSS, Medicare and other contributions
Minimum wage earners or annual income of P60,000 whichever is higher
Government employees with salary grades 1-3
De Minimis Benefits
Thirteenth (13th) month pay and other benefits
Overview on Withholding tax

16. Overview on Withholding tax
DE MINIMIS BENEFITS
Monetized unused vacation leave of private employees credits not exceeding 10 days (RR 8-00) and monetized value of leave credits of gov’t. employees (RR10-00)
Medical cash allowance - P750 per semester/employee
Rice subsidy –P1,000 or 1 sack of rice (not more than P1,000)
Clothing allowance – P3,000 per annum
Medical Benefits – P10,000 per annum
Laundry allowance – P300 per month
Overview on Withholding tax

17. Overview on Withholding tax
DE MINIMIS BENEFITS
Christmas or anniversary gifts – P5,000 per annum.
Gifts given to employees under special circumstances
Daily meal allowance for overtime work not exceeding 25% of the basic minimum wage.
Overview on Withholding tax

18. Overview on Withholding tax
DE DUCTIONS FROM GROSS COMPENSATION INCOME:
Basic Personal Exemptions – P50,000 per taxpayer
Additional Exemptions for qualified dependent children – P25,000 per child, maximum of 4
Health or Medical Insurance – 2,400 per year
Overview on Withholding tax

19. PART ii latest amendments ON WITHHOLDING TAX on compensation

20. Implementing the provisions of Republic Act 10653
Subject: An Act Adjusting the 13th Month Pay and Other Benefits Ceiling Excluded from the Computation of Gross Income
Latest amendment to the Withholding Tax Law: Republic Act 8424 as implemented by RR 2-98
Revenue regulation

21. REVENUE REGULATION 3-2015 13th Month Pay & Other Benefits:
13th Month Pay – 1 month basic salary
Other benefits include the following:
Christmas bonus
Productivity incentive bonus
Loyalty awards
Gifts in cash or in kind
Other benefits if similar in nature including Additional Compensation Allowance (ACA)
REVENUE REGULATION

22. NEW LAW OLD LAW P82,000.00 P30,000.00 Revenue regulation 3-2015
13TH Month Pay & Other Benefits:
P82,000.00
Note:
It does not apply to self-employed individuals and income generated from business
It applies to 13th Month pay and Other benefits paid or accrued beginning January 1, 2015.
13th Month Pay & Other Benefits:
P30,000.00
Revenue regulation

23. “TAXES are part of our world and will always be part of our lives
“TAXES are part of our world and will always be part of our lives. So instead of complaining, lets simply understand them and put them to good use in our lives”
Tom Wheelright

24. THANK YOU. RDO 31, Sta. Cruz, Manila Speaker: Andy Bisares
Revenue Officer III - Assessment
OIC RDO: Max T. Cebrecus Jr.
Asst. Chief, Assessment Section: Ronan Martirez
Hotline Number: