Transcript Association of Government Accountants of the Philippines
Association of Government Accountants of the Philippines
R.A. 9504 Minimum Wage Tax Exemption Revenue Regulations No. 10-2008 July 8, 2008
Implementing Pertinent Provisions of Republic Act No. 9504, “An Act Amending Sections 22, 24, 34, 35, 51, and 79 of Republic Act No. 8424, as Amended, Otherwise Known as The National Internal Revenue Code” Relative to the Withholding of Income Tax on Compensation and Other Concerns.
‘Statutory Minimum Wage’
refer to the rate fixed by the Regional Tripartite Wage (RTWPB). The RTWPB of each region shall determine the wage rates in the different regions based.
and (SMW) shall Productivity Board
The minimum wage earners as defines in this Code shall be exempt from the payment of income tax on their taxable income: provided, further, that the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.
Holiday pay, overtime pay, night shift differential pay and hazard pay earned by the aforementioned MWE shall likewise be covered by the above exemption. Provided, however, that an employee who receives/earns excess of the additional allowable compensation statutory such as commissions, honoraria, fringe benefits, benefits in amount of P30,000.00, taxable allowances and other taxable income other than the SMW, holiday pay, overtime pay, hazard pay and night shift differential pay shall not enjoy the privilege of being a MWE and, therefore, his/her entire earnings are not exempt from income tax and, consequently, from withholding tax.
MWEs receiving other income, such as income from the conduct of trade, business, or practice of profession, except income subject to final tax, in addition to compensation income are not exempted from income tax on their entire income earned during the taxable year. This rule, notwithstanding, the SMW, Holiday pay, overtime pay, night shift differential pay and hazard pay shall still be exempt from withholding tax.
Hazard pay shall mean the amount paid by the employer to MWEs who were actually assigned to danger or strife-torn areas, disease-infested places, or in distressed or isolated stations and camps, which expose them to great danger of contagion or peril ti life. Any hazard pay paid to MWEs which does not satisfy the above criteria is deemed subject to income tax and consequently, to withholding tax.
In case of hazardous employment, to the nearest DOLE Regional/Provincial Offices the employer shall attach to the Monthly Remittance Return of Withholding Tax on Compensation (BIR Form No. 1601C) for return periods March, June, September and December a copy of the list submitted – Operations Division/Unit showing the names of MWEs who received the hazard pay, period of employment, amount of hazard pay per month; and justification for payment of hazard pay as certified by said DOLE/allied agency that the hazard pay is justifiable.
Any reduction or diminution of wages for purposes employer.
of exemption The from offenders income may be tax shall constitute misrepresentation and therefore, shall result to the automatic disallowance of expense, i.e., compensation and benefits account, on the part of the criminally prosecuted under existing laws.
Compensation income of employees in the public sector with compensation income than the SMW in the non-agricultural sector, as fixed by RTWPB/NWPC, applicable to the place where he/she is assigned.
The basic salary of MWEs in the public sector shall be equated to the SMW in the non-agricultural sector applicable to the place where he/she is assigned. The determination of the SMW in the public sector shall likewise adopt the same procedures and consideration as those of the private sector.
Holiday public pay, sector overtime employee pay, who night shift differential pay and hazard pay earned by the aforementioned MWE in the public sector shall likewise be covered by the above exemption. Provided, however, that a receives additional compensation such as commissions, honoraria, fringe benefits,
benefits in excess of the allowable statutory amount of P30,000.00, taxable allowances and other taxable income other than the SMW, holiday pay, overtime pay, night shift differential pay and hazard pay shall not enjoy the privilege of being a MWE and, therefore, his/her entire earnings are not exempt from income tax and, consequently, from withholding tax.
In case of hazardous employment, the employer shall attach to the Monthly Remittance and hazard pay.
of Management Withholding (DBM) Tax circular/s, on Compensation (BIR Form No. 1601C) for return periods March, June, September and December a copy of Department of Budget or equivalent, as to who are allowed to receive
The basis of the computation of the minimum wage rates prescribed by law shall be the normal working time of eight (8) hours a day.
The computation of wages shall be in accordance with the Collective Bargaining Agreement (CBA), if any, or the provisions of the Labor Code as implemented. Unless otherwise amended or repealed by subsequent pertinent laws, rules and regulations, the holiday pay, overtime pay, night shift differential and hazard pay shall be understood to be computed based on such agreement or labor law provisions.
Computation of Wages
I. Not consider paid on Saturday and Sunday or Rest day
261 days x P382 = P99,702 annually P99,702 12 months = P8,308.50 per month P4,154.25 semi monthly P8,308.50
2 = P99,702 52 weeks = P1,917 weekly
Computation of Wages
II. Not consider paid on Sunday or Rest day
313 days x P382 = P119,566 annually P119,566 12 months = P9,964 per month = P4,981.92 semi monthly P9,964 2 P119,566 52 weeks = P2,299.35 weekly
Computation of Wages
III. Considered paid on rest days, special days, and regular holidays
365 days x P382 = P139,430 annually P11,619.17 per month P139.430
12 months = P11,619.17
2 = P139,430 52 weeks = P5,809.59 semi monthly P2,681.35 weekly
Computation of Wages
IV. Required to work everyday including Sunday or Rest days, Special and Regular Holidays
392.5 days x P382 = P149,935 annually P149,935 12 months = P12,494.58 monthly P6,247.29 semi monthly P12,494.58
2 = P149,935 52 weeks = P2,883.37 weekly
Gross benefits which are received by officials and employees of both public and private entities in the amount of thirty thousand pesos (P30,000) or less shall be exempted from income and withholding taxes. The 13 th Month Pay is equivalent to the total basic salary earned during the year divided by 12 months.
and Representation employees & Transportation Allowance (RATA) granted to public officers under the General Appropriations essentially government Act constitute and the Personnel Economic Relief Allowance (PERA) which reimbursement for expenses incurred in the performance of personnel’s official duties shall not be subject to income consequently to withholding tax.
tax and
Allowance of Personal Exemption for Individual Taxpayer
A basic personal exemption amounting to Fifty thousand pesos (P50,000) for each individual taxpayer.
such In the case or married individuals where only one of the spouses is having gross income, only spouse shall be allowed the personal exemption.
Additional Exemption for Dependent not exceeding four (4).
– there shall be allowed an additional exemption of twenty five thousand pesos (P25,000) for each dependent
The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals.
In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children.
A dependent means a legitimate, illegitimate, or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried, and not gainfully employed or if such dependent, regardless of age, is incapable of self-support.
The personal and additional exemptions applicable for calendar year 2008 shall be as follows: • For the period from January 1 to July 5, 2008, single taxpayers are entitled to P10,000.00, head of the family at P12,500.00, each married individual at P16,000.00, and for each qualified dependent child, not exceeding 4 children, P4,000.00, computed on on a pro-rata basis of the full-year exemptions under the old law.
• For the period from July 6 to December 31, 2008, the pro-rated personal exemption children, as additional exemption.
shall be P25,000.00, regardless of status, and P12,500 for each qualified dependent child, not exceeding 4
Personal exemption Single Head of the family Married Additional exemption for Every QDC
2008
January 1 to July 5 July 6 to December 31 Total
P10,000 12,500 16,000
4,000
P25,000 P35,000 25,000 37,500 25,000 41,000
12,500 16,500
The following shall be considered as
“de minimis”
benefits not subject to income tax, hence, not subject to withholding tax on compensation income of both managerial and rank and file employees: a.
b.
Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year and the monetized value of leave credits paid to government officials and employees; Medical cash allowance to dependents of employees not exceeding P750.00 per employee per semester of P125 per month;
c. Rice subsidy of P1,500.00 or one (1) sack of 50 kg. rice per month amounting to not more than P1,500.00; d. Uniforms and clothing allowance not exceeding P4,000.00 per annum; e. Actual yearly medical benefits not exceeding P10,000.00 per annum; f.
Laundry allowance not exceeding P300.00 per month; g. Employees achievement awards, e.g., for length of service or safety achievement, which must be in the form of a tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding P10,000.00 received by the employee under an established written plan which does not discriminate in favor of highly paid employees;
h.
i.
j.
Gifts given during Christmas and major anniversary celebrations not exceeding P5,000.00 per employee per annum; Flowers, fruits, books, or similar items given to employees under special circumstances, e.g., on account of illness, marriage, birth of a baby, etc.; and Daily meal allowance for overtime work not exceeding twenty five percent (25%) of the basic minimum wage.
The amount of
“de minimis”
benefits conforming to the ceiling considered in determining the P30,000.00 ceiling of ‘other benefits’ excluded from gross income under Section 32(b)(7)(e) of the Code. Provided that, the excess of the herein prescribed
‘de minimis’
shall not be benefits over their respective ceilings prescribed by these regulations shall be considered as part of employee receiving it will be subject to tax only on the excess over the P30,000.00 ceiling. Provided, further, that MWEs receiving P30,000.00 limit shall be taxable on the excess benefits, as well as on his salaries, wages and allowances, just ‘other benefits’ exceeding the like an
‘other benefits’
employee and the receiving compensation income beyond the SMW.
Any amount given by the employer as benefits to its employees, whether classified as
“de minimis”
benefits or fringe benefits, shall constitute as deductible expense upon such employer.
Where compensation is paid in property other than money, the employer shall make necessary arrangements to ensure that the amount of the tax required to be withheld is available for payment to the Bureau of Internal Revenue.
Separated/terminated employees within the period from January 1 to July 5, 2008, where the total exemptions (e.g.
married-P32,0000 used in the annualized computation were likewise shown in the issued BIR Form 2316, shall be reported by the employer under the alphalist of terminated employees with date of termination/separation.
For those with changes in exemptions, such as that of having an additional dependent child, or for those with successive employment for taxable year 2008, shall be applied for the second semester.
the applicable apportioned exemption for January 1 to July 5, 2008 shall be applied for the first semester and the applicable apportioned exemption for July 6 to December 31, 2008
A.
1.
The Annual Information Return of Income Taxes Withheld on Compensation must show among others, the following; Withholding Agent’s registered name, address and Taxpayer’s Identification Number (TIN).
B.
1.
2.
3.
The alphabetical list of employees must show the following; Name and TIN of employees; Gross compensation paid by present and previous employers for the calendar year; (a) Taxable 13 th month pay/other benefits for the rank and file employees; (b) Taxable fringe benefits for managerial employees;
4. Non-taxable 13 th employer); month pay/other benefits (Present 5. Non-taxable statutory minimum wage; 6. Non-taxable holiday pay, overtime pay, night shift differential pay and hazard pay (minimum wage earners only); 7. (a) For 2008, Amount of Exemptions (January 1 to July 5, 2008) and Amount of Exemptions (July 6 to December 31, 2008); (b) For 2009 ad thereafter, Amount of Exemptions; 8. Amount of premium payments on health and/or hospitalization insurance not exceeding P2,400.00, if any;
9. Tax required to be withheld computed in accordance with Sec. 24 (A) of the Code; 10. Tax withheld by all present employers for the calendar year; and 11. Adjustment, if any.
C. The alphabetical list of employees shall be prepared indicating, among others, separate listings of the following: 1.
Employees Separated/Terminated before December 31 of the taxable separation/termination); year (indicate date of 2.
Employees whose compensation income are exempt from withholding tax BUT subject to income tax.
3. Employees whose total compensation income are exempt from withholding tax and not subject to income tax (indicate if MWE); 4. Employees as of December 31 of the taxable year with no previous employment within the year; 5. Employees as of December 31 of the taxable year with previous employment within the year; 6. Employees who received Fringe Benefits subjected to Fringe Benefit Tax; 7. Alien employees subject to withholding tax.
Requirement for list of payees-
In addition to the manually prepared alphabetical list of employees and list of payees and income payments subject to creditable and final withholding taxes which are required to be attached as integral part of the Annual Information Returns (BIR Form No.
1604CF/1604E), Monthly Remittance Returns (BIR Form No. 1601C etc.), the withholding agent may submit soft copy in 3.5-inch floppy diskettes/CD or email: [email protected]
, containing the said alphalists.
•
Optional Standard Deduction-
in lieu of the deductions allowed, an individual subject to tax may elect a standard deduction in an amount not exceeding forty percent (40%) of his gross sales or gross receipts, as the case may be. In the case of a corporation subject to tax, it may elect a standard deduction in an amount not exceeding forty percent (40%) of its gross income.
Election of Optional Standard Deduction in the return shall be irrecoverable for the taxable year for which the return is made. An individual who is entitled to and claimed for the optional standard deduction shall not be required under this Code.
Provided income.
further, that except when the Commissioner otherwise permits, the said individual shall keep such records pertaining to his gross
Gross Compensation Income
• Salaries & Wages • Overtime Pay • Emergency Pay • Loyalty Pay • Director’s Pay
Gross Compensation Income
• Allowances – Representation & Transportation – Cost of Living – Clothing – Housing – Medical – Meal – Laundry – Others
Gross Compensation Income
• Vacation Leave • Bonus/Incentives – Christmas Bonus – Incentive Pay – Productivity Bonus – Anniversary Bonus • Commission • Profit Sharing • Retirement Benefit
Deduction from gross Compensation Income
• SSS Contribution • GSIS Contribution • Pag-ibig Fund • PhilHealth • Union Dues
Revenue Memorandum Circular No. 34-2008
Tax Treatment of Director’s Fees for Income Tax and Business tax Purposes
Kinds of Directors
1. Working Director 2. Non-Working Director
Thus, fees including director’s fees, if the director is, at the same time, an employee of the employer/corporation compensation income.
constitute The director’s fees received by employees are exempt from the value-added tax under Section 109 of the Code.
However, if these fees are paid to a director who is not an employee of the corporation paying such fees (i.e., whose duties are confined to the attendance of and participation in the meetings of the board of directors),
such fees are income
NOT
because treated as compensation of the absence of employer-employee relationship, but rather, the same should squarely fall under “Gross income derived from the conduct of trade or business or exercise of a profession”.
The fees received by the director who is not an employee of the payor corporation are subject to ten percent (10%) creditable withholding tax if his gross income fro the current year do not exceed P720,000.00 or fifteen percent (15%) if his gross income exceeds P720,000.00
These payments fall under employees of the company.
“Professional Fees, talent fees, etc., for services rendered by individuals” which include under its (purview “Fees of director’s who are not
It is also emphasized that the amount subject to the 10% or 15% creditable withholding tax is not only confined to fees, but also per diems, allowances and any other form of income payment made to the director.
Aside from being liable to the payment of the income tax, these directors who are not employees, having received fees which had been subsequently reported in their annual income tax returns should likewise be liable to pay business tax on account of such receipt of income.
They fall under the category of sellers of services under Title IV of the Code who are liable to pay the 12% VAT in their gross receipts, or to the 3 percentage tax, should they fall to meet the VAT threshold.
Tax Due = Tax Withheld
Example: Tax payer Income Tax (Jan. to Dec.) Less tax Withheld (Jan. to Nov.) Withholding Tax for December A 30,000 28,000 B 30,000 33,000 C 30,000 30,000 2,000 None None Refund Jan. 20 None 3,000 None
Requisites of Substituted Filing
• The employee
compensation
receives
income purely
(regardless of amount during the taxable year) • The employee receives income only from
one employer
during the taxable year • The
amount of tax
due from the employee at the at the end of the year
equals of tax withheld by the employer
the
amount
• The employee’s spouse also complies with all three conditions stated above.
Persons Not Qualified for Substituted Filing
• Individuals deriving compensation income from two or more employers concurrently or successively at any time during the taxable year • Employees deriving compensation income regardless of the amount, whether from a single or several employees during the calendar year, the income of which has not been withheld correctly (i.e., tax due is not equal to the tax withheld) collectible or refundable return.
resulting to
Persons Not Qualified for Substituted Filing
• Employees whose monthly gross compensation income does not exceed Five Thousand Pesos (P50,000.00) or the statutory minimum wage whichever is higher, and opted for non-withholding of tax on said income.
• Individuals deriving other non-business, non profession related income in addition to compensation income not otherwise subject to a final tax.
Persons Not Qualified for Substituted Filing
• Individuals receiving purely compensation income from a single employer, although the income tax of which has been correctly withheld, but whose spouse is not entitled to substituted filing.
• Non-resident aliens engaged in trade or business in the Philippines deriving purely compensation income or compensation income and other business or profession related income.
Final Withholding Tax
• Interest • Dividend • Prizes • Winning • Royalty • Capital Gain