WITHHOLDING TAX ON

COMPENSATION
 Applicable Provisions of:

Revenue Regulations No. 2-98, as amended

Labor Code of the Philippines, Presidential Decree No. 442,as amended

Presented by:
NIKKI G. ESTORES, CPA, MBA
 Compensation Income
Defined

Compensation means all remuneration for services
performed by an employee for his employer under an
employee-employer relationship unless exempted by this
Code.

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 Exemptions (cont…)

1. Remunerations received as an incident of employment
(retirement/separation)
2. GSIS, SSS, PHIC, HDMF contributions and Union Dues
 RMC 27-2011 and RMC 53-2011
 Voluntary contributions in excess of the amount considered
as compulsory are not excludible from the gross income of
the taxpayer and hence, not exempt from IT and
consequently from WT

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 Exemptions (cont…)

3. Thirtheenth (13th) Month Pay and Other Benefits not
exceeding P30,000
Other Benefits such as
Christmas bonus
Productivity
Loyalty award
Gifts in cash or in kind
Other benefits of similar nature
Excess over the prescribed ceiling of the “de minimis
benefits”

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 Exemptions (cont…)

4. Compensation of MWEs who work in the private sector
and being paid the Statutory Minimum Wage
applicable to the place where he is assigned.

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 Latest Minimum Wage

In Region VII-Class C (Tagbilaran City and all municipalities
in Bohol province & Negros Oriental Province)

P 323.00 – Non-Agricultural Sector

P303.00 – Agricultural Sector

(effective March 10, 2017)

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 Other Compensation

The following compensation received by minimum wage
earners shall likewise be exempt from income tax:
Holiday pay
Overtime pay
Night shift differential pay
Hazard pay

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 TAKE NOTE!

 An employee who receives additional compensation
other than the SMW, holiday pay, overtime, hazard pay,
and night sift differential pay such as:
 Commissions
 Honoraria
 Fringe benefits
 Taxable allowances
 And other taxable income
SHALL NOT ENJOY THE PRIVILEGE OF BEING A MWE.

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PROCEDURES FOR FILING 1902
Employee shall within
10 days upon
employment 1902
(triplicate)

2305 RDO
(within 10 days
after change of (within 30
status) days after
receipt)

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 Registration

 Use BIR Form 1902 for new employees
 Submit to the employer within 10 days from the date of
employment
 Use BIR Form 2305 in case of change/s of information data in
previously submitted 1902
 Submit to the employer within 10 days after the following
changes
 Status
 Personal and additional exemption
 Employment working status of the spouse
 Multiple employment status
 Amount of compensation income

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 Duplicate -
Employer

Triplicate - Employer:
Original - RDO
Employee Review,
Compute,
Withheld
and Apply
Exemptions

File
Copy File
Copy

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 Registration

 The employer shall review the exemptions of the
employees
 The employer shall transmit all copies after
accomplishing the employer’s portion to the RDO
where the employer is registered within 30 days
following its receipt fr0m the employee
 Registration of employees shall be at the RDO having
jurisdiction over the employee’s place of assignment
 In case of multiple employment, it shall be at the RDO
where the main employer is registered.

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 Additional Requisites

 Marriage contract

 Birth certificate of each qualified dependent (child/ren

certified by the Local Civil Registry Office/ National
Statistics Office/ equivalent document issued by
government office

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 Additional Requisites (cont…)

 Certificate of employment if husband is working abroad

 Sworn declaration and Waiver of Right to claim

Exemptions of Qualified Dependent child(ren) by the
husband in case wife is claiming the additional
exemption

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 Additional Requisites (cont…)

 Medical Certificate of qualified dependent child, if
physically/mentally incapacitated;

 Court decision of legal adoption of children

 Death certificate

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FAILURE TO FILE 1902/2305:

Failure to file 1902:
Zero exemption shall be applied based on the
revised withholding tax table

Failure to file 2305:

Employer shall withhold based on reported
personal exemptions existing prior to change

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 IN CASE THE HUSBAND WAIVES
HIS RIGHT TO EXEMPTION:
Husband 1902
Accomplish 3 copies
“Annex F”
Wife’s employer:
Deduct on the month
Husband’s employer:
Stopped deducting
Employer of
Triplicate Husband
Employee acknowledge
Original
Wife’s
Employer
Duplicate
Husband’s Stop
employer Deducting

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 Waiver

 Husband is the proper claimnant of dependent children
 Wife shall claim full additional exemption
 Husband is unemployed
 Husband is a non-resident citizen deriving income from
foreign sources
 Husband waives his right
 In case husband waives his right to claim the additional
exemption
 Shall accomplish Sworn Declaration and Waiver of Right
to Claim Exemptions of Qualified Dependent Children

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 PERSONAL AND ADDITIONAL
EXEMPTION

• Single P 50,000
• Head of the Family 50,000
• Married 50,000
• Qualified dependent child 25,000

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 Right to Claim Withholding
Tax Exemption

 An employee receiving compensation income shall be
entitled to withholding tax exemptions, provided
he/she must file
 1902 – Application for registration
 2305 – Certificate of Update of Exemption and of
Employer’s and Employee’s Information

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 On Exemptions

 Every employer should ascertain whether or not a child
being claimed is a qualified dependent
 If taxpayer should have additional exemption during
the taxable year, he may claim the corresponding
additional exemption in full for such year
 If the taxpayer dies during the taxable year, the estate
may claim the full exemptions as if he died at the close
of the year

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 On Exemptions

 Taxpayer may still claim full exemptions during the
taxable year on the following cases:
 Spouse or any of the dependent dies
 Any of such dependents marries
 Becomes 21 years old
 Becomes gainfully employed

As if it occurred at the close of such year

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 Sec. 2.79 (B) Computation of
Withholding Tax

1) Withholding tax table
a) Old table (effective January 1, 2006)
‐ January 1 to July 5, 2008
b) Revised Transitory Withholding Tax Table
‐ July 6 to December 31, 2008
c) Revised Withholding Tax Table
‐ January 1, 2009 and beyond

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 Use of Withholding Tax Table

 Withholding tax table Withholding-Tax-Table.jpg
 Four tables for monthly, semi-monthly, weekly and daily
 Each tax table is grouped into Tables A and B
 A for employees with no QDC
 B for employees with QDC
 1st column – exemption status
 2nd column – amount of exemption in pesos
 Columns 1 to 8 – reflect the portion of the amount of taxes
 Z – for zero exemption
 S – single
 ME – married employee
 Numerals – 1 to 4 represents the number of dependents

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 Steps to Determine the Amount of
Tax to be Withheld

4. Use the appropriate tables
5. Fix the compensation level using the regular
compensation income
6. Compute the withholding tax due

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Article 83. Normal Hours of
Work (paragraph 1)

The normal hours of work of any employee shall not
exceed eight (8) hours a day.

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Article 84. Hours Worked

Hours worked shall include (a) all time during which an
employee is required to be on duty or to be at a prescribed
workplace; and (b) all time during which an employee is
suffered or permitted to work

Rest periods of short duration during working hours shall

be counted as hours worked.

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Article 85. Meal Periods

Subject to such regulation as the Secretary of Labor may
prescribed, it shall be the duty of every employer to give
his employees not less than sixty (60) minutes time-off for
their regular meals.

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Article 87. Overtime Work

Work may be performed beyond eight (8) hours a day
provided that the employee is paid for the overtime work,
an additional compensation equivalent to his regular wage
plus at least twenty five percent (25%) thereof. Work
performed beyond eight hours on a holiday or rest day
shall be paid an additional compensation equivalent to the
rate of the first eight hours on a holiday or rest day plus at
least thirty percent (30%) thereof.

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Article 88. Undertime Not Offset
by Overtime

Undertime work on any particular day shall not be offset
by overtime work on any other day. Permission given to
the employee to go on leave on some other day of the
week shall not exempt the employer from paying the
additional compensation required in this Chapter.

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Article 93. Compensation for Rest
Day, Sunday or Holiday Work

a) Where an employee is made or permitted to work on his
scheduled rest day, he shall be paid an additional
compensation of at least thirty percent (30%) of his regular
wage. An employee shall be entitled to such additional
compensation for work performed on Sunday only when it
is his established rest day.
b) When the nature of the work of the employee is such that
he has no regular workdays and no regular rest days can be
scheduled, he shall be paid an additional compensation of at
least thirty percent (30%) of his regular wage for work
performed on Sundays and holidays.

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Article 93. Compensation for Rest Day,
Sunday or Holiday Work (cont…)

c) Work performed on any special holiday shall be paid an
additional compensation of at least thirty percent (30%) of
the regular wage of the employee. Where such holiday work
falls on the employee’s scheduled rest day, he shall be
entitled to an additional compensation of at least fifty
percent (50%) of his regular wage.
d) Where the collective bargaining agreement or other
applicable employment contract stipulates the payment of a
higher premium pay than that prescribed under this Article,
the employer shall pay the higher rate.
Article 94. Rights to Holiday Pay

a) Every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments
regularly employing less than ten (10) workers;
b) The employer may require as employee to work on any
holiday but such employee shall be paid a compensation
equivalent to twice his regular rate; and
c) As used in this Article, “holiday” includes: New Year’s Day,
Maundy Thursday, Good Friday, the ninth of April, the first
of May, the twelfth of June, the fourth of July, the thirtieth
of November, the twenty-fifth of December and the day
assigned by law for holding a general election.”

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Illustration A

Mr. A, single with no dependent receives P5,000 basic
salary for payroll period January 1-15, 2017. His SSS
contribution is P 333.30 and P 100.00 for Pag-ibig
contribution.

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Computation

Basic Salary 5,000.00
Less: Gov’t dues (SSS and Pag-ibig) 433.30
Net Regular Compensation 4,566.70
Less: Compensation Level 3,333.00
Excess 1,233.70

Tax on 3,333.00 104.17

Tax on Excess (1,233.70 X 15%) 185.06
Withholding Tax for January 1-15, 2014 289.23

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Illustration B

Mr. A, married with no dependent receives P 4,500 for
payroll period January 1-15, 2017. His SSS contribution is
P 266.70 and P 100.00 for Pag-ibig contribution.

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Computation

Basic Salary 4,500.00
Less: Gov’t dues (SSS and Pag-ibig) 366.70
Net Regular Compensation 4,133.30
Less: Compensation Level 3,333.00
Excess 800.30

Tax on 3,333.00 104.17

Tax on Excess (300.30 X 15%) 120.05
Withholding Tax for January 1-15, 2014 224.22

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Illustration C

Mr. A, married with 1 dependent receives P 4,500 for
payroll period January 1-15, 2017. His SSS contribution is
P 266.70 and P 100.00 for Pag-ibig contribution.

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Computation

Basic Salary 4,500.00
Less: Gov’t dues (SSS and Pag-ibig) 366.70
Net Regular Compensation 4,133.30
Less: Compensation Level 3,542.00
Excess 591.30

Tax on 3,542.00 20.83

Tax on Excess (591.30 X 10%) 59.13
Withholding Tax for January 1-15, 2014 79.96

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Illustration D

Mr. A, single with no dependent receives P 323.00 daily
and has worked for 13 days for payroll period January 1-15,
2017. His approved overtime for the period is 6 hours. His
SSS contribution is P 233.30 and P 100.00 for Pag-ibig
contribution. He has a computed incentive of P 3,500.00.

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Computation

Basic Salary (323.00 X 13days) 4,199.00
Add: Overtime (323.00/8hours X 6hours X 125%) 302.81
Add: Incentives 3,500.00
Total Gross 8,001.81
Less: Gov’t dues (SSS and Pag-ibig) 333.30
Net Regular Compensation 7,668.51
Less: Compensation Level 5,000.00
Excess 2,668.51

Tax on 5,000.00 354.17

Tax on Excess (2,266.76X 20%) 533.70
Withholding Tax for January 1-15, 2014 887.87

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Illustration E

Mr. A, married with 2 dependents receives P 323.00 daily
and has worked for 13 days for payroll period January 1-15,
2017. His approved overtime for the period is 6hours. His
SSS contribution is P 233.30 and P 100.00 for Pag-ibig
contribution. He has a computed incentive of P 3,500.00.

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Computation

Basic Salary (323.00 X 13days) 4,199.00
Add: Overtime (323.00/8hours X 6hours X 125%) 302.81
Add: Incentives 3,500.00
Total Gross 8,001.81
Less: Gov’t dues (SSS and Pag-ibig) 333.30
Net Regular Compensation 7,668.51
Less: Compensation Level 7,083.00
Excess 585.51

Tax on 7,083.00 354.17

Tax on Excess (585.51X 20%) 117.10
Withholding Tax for January 1-15, 2014 471.27

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 Liability for Tax

 Employer
 Responsible for withholding and remittance of correct
amount of tax
 Employee
 Responsible for submission of 1902/2305

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 Take Note!

 Monthly taxes withheld on your salary are on monthly
withholding taxes on compensation only.

 At year end, you also need to pay your income taxes.

 But, all taxes withheld on your salary for the year can be
deducted to your annual income tax due.
Year End Adjustment (YEA)

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 Basic Concept of
Year-End Adjustment

A B C
Compensation Income –net 200,000 200,000 200,000
Less: Exemption (single) 20,000 20,000 20,000
Taxable Income 180,000 180,000 180,000
Tax Due 32,500 32,500 32,500
Less: Tax Withheld Jan-Nov 32,500 30,000 34,500
EVEN 0
Payable 2,500
Refundable (2,000)

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 Annualized Computation

 To be used when the employer-employee relationship is
terminated before the end of the calendar year;

 When computing for the year-end adjustment

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Steps in the annualized computation

1. Determine the taxable regular and supplementary
compensation

2. If the employee has previous employment during the

year, add the taxable regular and supplementary
compensation paid to the present employer

3. Deduct the personal and additional exemptions of the

employee

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Steps in the annualized computation

4. Compute the amount of tax

5. Determine the deficiency or excess

 if Tax due > W/tax, the employer shall pay difference
 Is a matter of settlement between the employer and employee
 If tax due < w/tax, the employer shall refund

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Tax Table
Over
But not
over

Amount rate
Of excess
over
Not over 10,000.00 5%

10,000.00 30,000.00 P500 + 10% 10,000.00

30,000.00 70,000.00 2,500 + 15% 30,000.00

70,000.00 140,000.00 8,500 + 20% 70,000.00

140,000.00 250,000.00 22,500 + 25% 140,000.00

250,000.00 500,000.00 50,000 + 30% 250,000.00

500,000.00 over 125,000 + 32% 500,000.00

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Illustration F

 Mr. A, single with no dependents received P 120,125 for
the year 2016 and has total approved overtime of
P 115.02.
 His SSS, Philhealth and Pag-ibig contributions for the
year totaled P 6,116.30.
 He received total 13th month pay of P 10,000 and total
special allowances of P 30,000.00 for the year.
 He only paid total withholding taxes of P 913.76
through salary deduction
 He also received incentives for the year for P 3,250.00

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Computation

Total Basic salary 120,125.00
Add: Overtime 115.02
Add: Incentives 3,250.000
Add: 13th month pay (non-taxable) 10,000.00
Add: Allowances (non-taxable) 30,000.00
Total Gross 163,490.02
Less: 13th month pay (non-taxable) 10,000.00
Less: Allowances (non-taxable) 30,000.00
Less: Gov’t dues (SSS and Pag-ibig) 6,116.30
Net Taxable Compensation 117,373.72
Less: Personal Exemption 50,000.00
Compensation for Computation of Income Tax 67,373.72

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Computation

Compensation for Income Tax Computation 67,373.72
Bracket 30,000.00
Excess 37,373.72

Bracket 2,500.00
Excess (37,373.72 X 15%) 5,606.06
Should be Income Tax 8,106.06
Tax Withheld from Salary 916.76
Tax Still Due 7,192.30

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Illustration G

Mr. Bob Uy, married, with an eight year old son and a
daughter born on December 29, 2016, had his first job on
January 2016. He receives P18,000 as monthly regular
compensation net of SSS, Philhealth and HDMF premiums.
13th month pay was P18,000. Allowances was P24,000.00.
The taxes withheld were P21,083.75.

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Computation

Total Basic salary (18,000 X 12) 216,000.00
Add: 13th month pay (non-taxable) 18,000.00
Add: Allowances (non-taxable) 24,000.00
Total Gross 258,000.00
Less: 13th month pay (non-taxable) 18,000.00
Less: Allowances (non-taxable) 24,000.00
Net Taxable Compensation 216,000.00
Less: Personal Exemption 50,000.00
Less: Additional Exemptions (25,000 X 2) 50,000.00
Compensation for Computation of Income Tax 116,000.00

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Computation

Compensation for Income Tax Computation 116,000.00
Bracket 70,000.00
Excess 46,000.00

Bracket 8,500.00
Excess (46,000 X 20%) 9,200.00
Should be Income Tax 17,700.00
Tax Withheld from Salary 21,083.75
Tax Refund (3,383.75)

GNP1 Marketing Corporation

- THANK YOU -

- END -