Transcript Slide 1

WITHHOLDING TAX ON
COMPENSATION
(Revenue Regulations No. 2-98, as amended)
Presented by:
MS. CYNTHIA E. OMERES, CPA
Revenue Officer
Assessment Division
COMPENSATION INCOME
DEFINED
Compensation
means
all
remuneration
for
services
performed by an employee for
his employer under an employeeemployer
relationship
unless
exempted by the Code.
EXEMPTIONS (CONT…)
1.
Remunerations
employment
received
as
an
incident
of
2.
Remuneration paid for agricultural labor.
3.
Remuneration for casual labor not in the course of an
employer’s trade or business
4.
Compensation for services by a citizen or
resident of the Philippines for a foreign
government or an international organization.
EXEMPTIONS (CONT…)
5. Damages
6. Life insurance
7. Amount received by the insured as a
return of premium
8. Compensation for injuries or sickness
9. Income exempt under treaty
EXEMPTIONS (CONT…)
10. Remuneration for domestic services
11. 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
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”
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.
Latest Minimum Wage per RR 5-2011
in Region XI :
P 286.00 + 5.00 – Non-Agricultural Sector
P 276.00 + 5.00 – Agricultural Sector
(effective January, 2012; Additional P10.00 on 5-1-12)
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
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.
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 MWE.
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.
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).
COMPUTATION OF WAGES
The basis of the computation of the minimum
wage rates prescribed by law shall be the
normal working hours – not more than 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
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 291.00 MWE
in Region XI
Equivalent Monthly Rate=
P 291.00 x 261 days
12 months
P 6,329.25
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 291.00 MWE
in Region XI
Equivalent Monthy Rate=
P 291.00 x 313 days
12 months
P 7,590.25..25
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
299- ordinary working days
11- regular holidays
52 – Sunday/Rest days
3- Special days
365- Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthy Rate=
P 291.00 x 365 days
12 months
P 8,851.25
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 3.9 392.5 -
ordinary working days
regular holidays
52 rest days x 130%
Special days
Total number of days/year
Example: P 291.00 MWE
in Region XI
Equivalent Monthly Rate=
P 291.00 x 392.5 days
12 months
P 9,518.13
DE MINIMIS BENEFITS
(AS AMENDED BY RR 5-2011)
a) Monetized unused vacation leave
credits of
private employees not exceeding 10 days during
the year;
b) Monetized value of vacation and sick leave credits
paid to government officials and employees;
c) Medical cash allowance to dependents of
employees, not exceeding p750 per employee per
semester or P125/month
DE MINIMIS BENEFITS
d) Rice subsidy of P1,500 or 1 sack of 50 kg rice per
month amounting to not more than P 1,500;
e) Uniform and clothing allowance not exceeding
P4,000/ annum;
f)
Actual medical assistance, e.g. medical
allowance to cover medical and healthcare
needs, annual medical/executive check-up,
maternity assistance, and routine consultations,
not exceeding P10,000 per annum;
DE MINIMIS BENEFITS
g) Laundry allowance not exceeding P300 per month
h) Employees achievement awards,
e.g., for length of service or safety achievement
• In a form of tangible personal property other than cash or gift
certificate, with an annual monetary value not exceeding
P10,000
• Under an established written plan which does not discriminate
in favor of highly paid employees;
DE MINIMIS BENEFITS
i) Gifts given during Christmas and major
anniversary celebrations not exceeding
P5,000 per employee per annum;
j) Daily meal allowance for overtime work
and night/graveyard shift not exceeding
25% of basic minimum wage on a per
region basis.
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.
PROCEDURES FOR FILING 1902:
Employee shall file
w/in 10 days upon
employment
1902
(triplicate)
2305
(w/in 10 days
after change of
status)
RDO
(w/in 30
days after
receipt)
Duplicate
–
Employer
Original RDO
File
copy
Triplicate –
Employee
File
copy
Employer:
review ,
compute,
withheld &
apply
exemptions
IN CASE THE HUSBAND WAIVES HIS RIGHT
TO EXEMPTION:
HAccomplish
“Annex
F”
3 copies
1902
W- employer:
Deduct on the mo
H- employer
Stopped deducting
Employer of
Hacknowledg
e
OriginalW’s
employer
Triplicateemployee
Duplicate
Hemployer
Stop
deductin
g
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
PERSONAL AND ADDITIONAL
EXEMPTION
•
•
•
•
Single
Head of the Family
Married
Qualified dependent child
P 50,000
50,000
50,000
25,000
Dependent CHILD

For purposes of additional exemption, a
“dependent” means a legitimate,
illegitimate or legally adopted child
chiefly dependent upon and living with
the taxpayer.
A DEPENDENT IS…...
• 21 years old or younger, or a physically and
mentally handicapped child, regardless of age
• dependent for chief support
• Unmarried
• not gainfully employed
• Can be claimed by only one of the spouses
PREMIUMS ON HEALTH &/OR
HOSPITALIZATION INSURANCE
• Not to exceed P2,400 or P200/mo.
• Total family’s gross income does not
exceed P250,000
• present the policy contract and original
official receipt
FAMILY INCOME INCLUDES:
• Primary income and other income from
sources received by all members of the
nuclear family, I.e., father, mother,
unmarried children living together as one
household, or a
single parent with
children.
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 & beyond
USE OF WTAX TABLE
Withholding tax table RR-2008-10-Annex-C.pdf
• 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
STEPS TO DETERMINE THE AMOUNT OF
TAX
TO BE WITHHELD
1. Determine the total monetary and non-monetary
compensation.
-13th month pay
-Productivity incentives
-Christmas Bonus
-other benefits
-GSIS/SSS etc
2. Segregate the taxable from non-taxable
compensation income paid to an employee for the
payroll period.
-P30,000 ceiling
-non-taxable retirement benefits / separation pay
Steps to determine the amount of tax
to be withheld
(3.)Segregate the taxable compensation income
determined in step 2 into regular taxable
compensation income and supplementary
compensation.
Regular compensation – basic salary, fixed
allowances for representation, transportation
and other allowances
Supplementary compensation – commission,
overtime pay, taxable retirement pay, taxable
bonus and other taxable benefits
Steps……..
(4) Use the appropriate tables
(5) Fix the compensation level using the regular
compensation income.
(6) Compute the withholding tax due.
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
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
• 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
Illustration
(1) Mr. Sy, single with no dependent receives
P12,000(net of SSS/GSIS, PHIC, HDMF employee share
only) as monthly regular compensation and P5,000 as
supplementary compensation for January, 2011 or a
total of P17,000.
Compute for the Withholding tax for Jan. 2011.
COMPUTATION
Regular compensation
Less : compensation level(line A-2 column 5)
P 12,000.00
10,000.00
Excess
2,000.00
Add: Supplementary compensation
5,000.00
7,000.00
Tax on P10,000
708.33
Tax on excess (P7,000 x 20%)
1,400.00
Withholding tax for Jan. 2011
P 2,108.33
Applicable Wtax Table
Monthly
1
Exemption
Status
0.00
0% over
2
0.00
+5%
3
4
41.67
+10%
over
208.33
+15%
over
5
6
7
8
1,875
4,166.67
10,416.67
A. Table for employees without qualified dependent
1. Z
0.0
1
0
833
2,500
5,833
11,667
20,833
41,667
15,833
25,000
45,833
LET’S CHECK:
Withholding tax – Jan. 2011
Withholding Tax (Feb.- Dec.11) 1,108.33 x 11
Total
Gross Income
Exemption – Single
= P 2,108.33
12,191.63
P14,299.66
P149,000.00
50,000.00
Taxable Income
P 99,000.00
Tax due
P 14,300.00
TAX TABLE
Over
But not
over
Of excess
over
Amount rate
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
LIABILITY FOR TAX
• Employer
• Responsible for withholding and
remittance of correct amount of tax
• Employee
• Responsible for submission of 1902 / 2305
STATEMENTS AND RETURNS
 BIR Form 2316
Employer shall furnish the employees Not Later Than
Jan. 31
Failure to furnish shall be a ground for mandatory
audit upon verified complaint of the payee
It shall include the fringe benefits given to rank & file
employees
Employers of MWEs are still required to issue BIR Form
2316 (June 2008 Encs version)
It shall indicate the health &/or hosp. insurance, if
any
The amount of SMW, OT, Holiday pay, Night diff, and
hazard pay shall be indicated
STATEMENTS AND RETURNS
• Form 2316 cont….
• It shall be signed by both the employer’s
authorized representative and the employee
• Shall contain a written declaration that it is
made under the penalties of perjury
• Shall contain a certification that the employer’s
filing of BIR Form 1604-CF shall be considered as
substituted filing
• The employer shall retain the duly signed 2316
for a period of three (3) years.
STATEMENTS AND RETURNS
• Form 2316 continued…
• The applicable box for MWEs shall be indicated
(under the enhanced form). This serves as proof
of financial capacity for purposes of loans,
etc…
• In case of successive employment during the
taxable year, an extra copy of BIR Form 2316
shall be furnished to his new employer
YEAR-END ADJUSTMENT
PURPOSE:
•
TAX DUE = TAX WITHHELD
WHEN:
• On or before the end of the calendar year, prior to the
payment of compensation for the last payroll.
• If terminated, on the day on which the last payment of
compensation is made.
BASIC CONCEPT OF
YEAR -END ADJUSTMENT
Compensation Income-net
Less: Exemption (single)
Taxable Income
Tax Due
Less: Tax Withheld Jan-Nov
EVEN
PAYABLE
REFUNDABLE
Compensation Income-net
A
B
C
230,000
230,000
230,000
50,000
50,000
50,000
180,000
180,000
180,000
32,500
32,500
32,500
32,500
0__
30,000
34,500
2,500
(2,000)
ANNUAL INFORMATION RETURN
 Manual Submission - 3 copies of 1604CF/1604E
Including the alphalist of employees and income
payees.
 Diskette/CD & email Submission thru
[email protected]
Individuals qualified for substituted filing
and must not file BIR Form No. 1700
1. Receiving purely compensation income regardless of amount;
2. Working for only one employer in the Philippines for the calendar year;
3. Income tax has been withheld correctly by the employer (tax due
equals tax withheld);
4. The employee’s spouse also complies with all the three conditions
stated above, and
5. Employer filed to BIR the Annual Information Returns on Income
Taxes Withheld (BIR Form 1604-CF).
Note:
All of the above requisites must be present. The Annual Information
Return
of Income Taxes Withheld on Compensation and Final Withholding Taxes
(BIR Form No. 1604-CF) filed by their respective employers duly stamped
“Received”, shall be tantamount to the substituted filing of income tax
returns by said employees.
TMD
Seminar on Annualized Withholding Tax (Year-End Adjustment) and Substituted Filing (BIR Form 1700)
SF 200 Slide 2
EFFECTIVITY OF SUBSTITUTED FILING
* Optional for taxable year 2001
* Mandatory effective taxable year 2002
START
Preparation of BIR
Form No. 1604 CF
Before Jan. 31
Employer files w/
BIR the duly accomplished
BIR FORM 1604CF
Subject to WTC?
On or before Jan 31
n
Employer shall issue
2306to the payee (FWT)
On or before Jan. 31
y
Entitled to substituted filing?
n
Employer shall issue
2316 to employee
y
Employer/employee to execute sworn
joint certification. Employer to furnish
employee copy of 2316/cert. to employee.
Employer to retain copy of joint cert.
On or before Jan. 31
On or before April 15
Employee files ITR
together with 2316 &
other pertinent docs
Thank You!