Transcript Slide 1

Republic Act No. 9504
AN ACT AMENDING SECTIONS 22, 24, 34,
35, 51 AND 79 OF RA 8424, AS AMENDED,
OTHERWISE KNOWN AS THE NATIONAL
INTERNAL REVENUE CODE OF 1997
Effectivity Clause
 The act shall take effect 15 days following
its publication in the Official Gazette or in at
least two (2) newspaper of General
Circulation
 It was approved by GMA on June 17, 2008
 It was published on June 21, 2008 in Malaya
and Manila Bulletin
 Date of Effectivity:
July 06, 2008
Compensation Income Defined
Compensation means all
remuneration for services
performed by an employee for
his employer under an
employee-employer relationship
unless exempted by the Code.
Exemptions from withholding
tax on compensation
1. Remunerations received as an incident of
employment (retirement/separation)
2. Remuneration paid for agricultural labor
3. Remuneration for domestic services
4. Remuneration for casual labor not in the
course of an employer’s trade or business
Exemptions (cont…)
5. Compensation for services by a citizen or
resident of the Philippines to a Foreign
Government or an International
Organization;
6. Damages
7. Life Insurance
8. Amount Received by the Insured as a
Return of Premium
Exemptions (cont…)
9. Compensation for Injuries or sickness
10. Income Exempt Under Treaty
11. GSIS, SSS, Medicare and other
contributions
(HDMF and Union Dues)
Exemptions (cont…)
12. Thirteenth(13th) Month Pay and Other
Benefits not exceeding P 30,000
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”
DE MINIMIS BENEFITS
a.) Monetized unused vacation leave credits
of employees not exceeding 10 days
during the year
• the monetized value of leave credits paid
to government officials and employees
b.) Medical cash allowance to dependents
• Not exceeding P750/employee/semester
or P125/month
DE MINIMIS BENEFITS
e) Rice subsidy of P1,500 or 1 sack of 50 kg
rice per month amounting to not more than P
1,500.
d.) Uniform and clothing allowance not
exceeding P4,000/ annum
e.) Actual yearly medical benefits not
exceeding
P10,000 per annum
f.) Laundry allowance not exceeding P 300.00
/month
DE MINIMIS BENEFITS
g.) Employees achievement awards in the form
of tangible personal property other than cash
or gift certificate with annual value not
exceeding P10,000 under established written
plan
h.) gifts given during Christmas and major
anniversary celebrations P5,000/annum/employee
DE MINIMIS BENEFITS
i.) Flowers, fruits, books or similar items
j.) daily meal allowance for overtime not to
exceed 25% of basic min. wage.
DE MINIMIS Rules
“DE MINIMIS BENEFITS” conforming to the
ceiling shall not be considered in determining
the P 30,000
the excess over the respective ceilings shall be
considered as part of the “other benefits” and
the employee receiving it will be subject to tax
only on the excess over the P30,000.
Exemptions (cont…)
(13) Compensation income of MWEs who work
in the private sector and being paid the
Statutory Minimum Wage applicable to
the place where he is assigned.
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
Take note!
 An employee who receives additional
compensation other than SMW, holiday
pay, overtime, hazard pay, and night shift
differential pay such as:
 Commissions
 Honoraria
 Fringe benefits
 Taxable allowances
 And other taxable income
shall not enjoy the privilege of being a
WME.
Take Note!
 MWEs receiving other income from
business or practice of profession, except
income subject to Final Tax, shall be
subject to Income Tax on their entire
income
 SMW, Holiday pay, overtime pay, night
shift differential pay, and hazard pay
shall still be exempt from WT
Hazard Pay
 the amount paid by the employer to MWEs
 Actually assigned to danger or strife-torn
areas
 Disease-infested places
 Distressed or isolated stations and camps
which exposed them to great danger or
contagion or peril to life
Any hazard pay paid to MWEs which does not
satisfy the above criteria is deemed subject to IT
and consequently to WT.
Hazardous Employment
 The employer shall attach to BIR Form
1601C for the months of March, June, Sept.,
and Dec.
 A copy of the List submitted to the
nearest DOLE Regional/Provincial Office
showing
 the names of the MWEs who received
the hazard pay;
 period of employment;
 amount of hazard pay per month; and
 Justification of payment of hazard pay
Caution
 Any reduction or diminution of wages for
purposes of exemption from Income Tax
shall
constitute
therefore,
shall
misrepresentation
result
to
and
automatic
disallowance of expense on the part of the
employer.
Exemptions (cont…)
(14) Compensation income of employees in the
public sector with compensation income of not
more than the SMW in the non-agricultural
sector, as fixed by RTWPB/NWPC, applicable
to the place where he is assigned.
FACTOR OR NUMBER OF
WORKING/PAID
DAYS IN A YEAR
1. For those who do not work and are not
considered paid on Saturdays and
Sundays or rest day
Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 261 days
12 months
Where 261 days
247113261-
ordinary working days
regular holidays
Special days
Total number of days/year
Example: P 382.00 MWE
in NCR
Equivalent Monthy Rate=
P 382.00 x 261 days
12 months
P 8,308
2. For those who do not work and are not
considered paid on Sundays or rest day
Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 313 days
12 months
Where 313 days
299113313-
ordinary working days
regular holidays
Special days
Total number of days/year
Example: P 382.00 MWE
in NCR
Equivalent Monthy Rate=
P 382.00 x 313 days
12 months
P 9,964
3. For those who do not work but are
considered paid on rest days, special
days and regular holidays
Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 365 days
12 months
Where 365 days
299113365-
ordinary working days
regular holidays
Special days
Total number of days/year
Example: P 382.00 MWE
in NCR
Equivalent Monthy Rate=
P 382.00 x 365 days
12 months
P 11,619
4. For those who are required to work
everyday including Sundays or rest day,
special days & regular holidays:
Equivalent Monthly
Rate (EMR)
=
Applicable Daily Wage Rate (ADR) x 261 days
12 months
Where 392.5 days
299 22 67.6 3 392.5 -
ordinary working days
regular holidays
52 rest days x 130%
Special days
Total number of days/year
Example: P 382.00 MWE
in NCR
Equivalent Monthy Rate=
P 382.00 x 392.5 days
12 months
P 12,495
Salient Features
 Sec. 22 Definition
‘statutory minimum wage’ shall refer to the rate
fixed by the Regional Tripartite Wage and
Productivity Board, as defined by the Bureau of
Labor and Employment Statistics (BLES) of the
Department of Labor and Employment (DOLE).
Right to claim WT exemption
 An employee receiving compensation
income shall be entitled to w/tax
exemptions, provided he/she must file
 1902 – Application for registration
 2305 – Cert.of Update of Exemption and
of Employer’s and Employee’s
Information
PERSONAL AND
ADDITIONAL EXEMPTION
Single
Head of the Family
Married
Qualified dependent child
50,000
50,000
50,000
25,000
On exemptions
 Every employer should ascertain whether or not a child
being claimed is a qualified dependent
 If TP should have additional exemption during the
taxable year, he may claim the corresponding
additional exemption in full for such year
 If the TP dies during the taxable year, the estate may
claim the full exemptions as if he died at the close of
the year
On exemptions
 If TP earned taxable income between Jan. to
July 5, 2008 and did not earn any taxable
income for the rest of the year, he is entitled
only to the old exemption.
 If TP earned his taxable income from July 6,
2008 (after the effectivity of this law), he is
entitled to the pro-rated exemption.
On exemptions
 TP 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 y.o.
 Becomes gainfully employed
As if it occurred at the close of such year
Failure to Register / Update
 Failure to file 1902
 The employer shall withhold under zero
exemption
 Failure to file 2305
 The employer shall withhold based on the
reported exemption existing prior to the
change of such status
 Any refund/under-withholding shall be
covered by the penalties prescribed under
Sec. 80 of the Code
Waiver
 H is the proper claimant of dependent children
 W shall claim full additional exemption
 H is unemployed
 H is non-resident citizen deriving income from
foreign sources
 H waives his right
 In case H waives his right to claim the additional
exemption
 Shall accomplish Sworn declaration and waiver
of Right to Claim Exemptions of Qualified
Dependent Children
Liability for Tax
 Employer
 Responsible for withholding and
remittance of correct amount of tax
 Employee
 Responsible for submission of 1902 /
2305
Transitory Provision
 MWEs whose compensation earned from
Jan 1 to July 5, 2008 were not subjected to
wtax but are, after considering the relevant
exemptions, still subject to Income Tax,
shall still be required to file ITR covering the
period from Jan to Jul 5, 2008, on or before
April 15, 2009.
YEAR END
ADJUSTMENT (YEA)
BASIC CONCEPT OF
YEAR -END ADJUSTMENT
A
Compensation Income-net
B
C
200,000
200,000
200,000
20,000
20,000
20,000
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
Less: Exemption (single)
Taxable Income
EVEN
PAYABLE
REFUNDABLE
0__
2,500
(2,000)
The end