Philippines Tax Computation

Tax Relief Program

• Exempts minimum wage earners in the private sector and their counterparts(casual employees) in the public sector from paying income tax.[Republic Act No. 9504]

• Personal exemptions up.

For instance, a family of one working spouse with 3 qualified dependents will have a total of P125,000.00 in personal exemptions. (from the OLD P 56,000.00)

• The law classify a DEPENDENT as a “legitimate, illegitimate or legally adopted child” living with the taxpayer and not more than 21 years old, unmarried and not employed.

New Tax Table For January 2009

Tax Computation in the Philippines

1. The first step is you should answer the following questions below: - What is Your Status? (Single or Married?) - Do You Have Any Dependent? How Many? - How much is your Monthly Basic Pay(salary)?(This does not include your overtime pay/monetary value of your late/tardiness,holiday pay, but includes the monthly allowance that you received.)

2. How much is your SSS,Philhealth,and HDMF (Pag-Ibig) monthly contributions? With your Monthly Basic Pay(Salary) you can immediately know your contributions.

For SSS: Illustration

Suppose your monthly basic pay(salary) is P11,000.00, then look for your corresponding SSS Contribution(under the main column Social Security and sub-column EE or Employee Contribution).

Suppose you have a P11,000 monthly basic pay (salary) then the ER or Employer Contribution would be P777.30 and your total monthly contribution that debit in the SSS is P1,144 (P777.30 +P366.70).

SSS Table

For PhilHealth: Illustration

For instance you have a monthly basic pay (salary) of P11,000, then your Philhealth Monthly Contribution would be P137.50. Just look for the column under Monthly Salary Range and find for the interval where your salary belongs and find for the corresponding Philhealth Monthly Contribution under the Employee's Share .

Aside from this it is also better and wise to know your employer's contribution counterpart. Again, going back to the Philhealth Table above just look for the column under Employer's Share that corresponds to your monthly gross income. If your monthly gross income is P11000.00 then your Employer's Share is P137.50 and the total amount that debit in your Philhealth Contribution is P275.00 (Employee's Share + Employer's Share).

PhilHealth Table

For HDMF/Pag-Ibig Contribution:

• Employer’s Contribution is Php 100.00 + Employee’s Contribution of Php 100.00

Note: Regardless of your gross monthly salary range.

3. Are you receiving other allowances like laundry allowance,transportation allowances, rice allowances,etc.? If yes how much?

You need this later on when you compute your withholding tax because these are not taxable. Failure to note this may result to erroneous result of computation.

4. What is TAXABLE INCOME?

Taxable income is the portion of income that is the subject of taxation.

In the Philippines our taxable income is determined by this formula:

Taxable Income = [Gross (Basic)Monthly Income+ Overtime Pay+Holiday Pay+Night Differential] - (minus) [Tardiness Deduction+Allowances+SSS Contribution+Philhealth Contribution,HDMF Contribution]

Note: I did not include and subtract the amount of personal exemptions(exemptions due to your status like:Head of the Family,Single,Married etc.) since your corresponding personal exemptions can be see later on in the tax table and your personal exemption is included already in the formula for computing the tax.You will understand it clearly later on when I introduce the general formula of withholding tax computation.

5.Factors you need to consider when solving your withholding tax (Applicable for Old Tax Ruling).

Factors that increases your tax: - Overtime Pay - Holiday Pay - Night Differential

Factors that decreases your tax: - Late/Tardiness - Allowances - SSS Contribution - Philhealth Contribution - HDMF Contribution - Personal Exemptions (ex. single, head of the family, head of the family with qualified dependents,etc)

6. You must have a copy of BIR Tax Table. See Slide #5.

7. Knowing the General Formula of Withholding Tax ,Knowing the Parts and to Use the Tax Table , and Computing Your Withholding Tax

General Formula:

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]

Where as Taxable Income=[Gross (Basic)Monthly Income+ Overtime Pay+Holiday Pay+Night Differential] - (minus) [Tardiness Deduction+Allowances+SSS Contribution+Philhealth Contribution,HDMF Contribution]

Note: Before Solving For your Withholding Tax, find your Taxable Income first and simply substitute the value in Withholding Tax Formula.

Parts of Tax Table - Bracket or Exemption - %over - Bracket Tax or Base Tax

Illustration

Assuming your tax is computed in a monthly basis and you already computed your TAXABLE INCOME (not your gross income) totaling to P8,558 and you are Single then:

Corresponding Bracket or Exemption:P6,667.00 Corresponding %over: 15% or.15 Corresponding Bracket Tax or Base Tax: P208.33

Computing Your Withholding Tax:

Withholding Tax = ( ([Taxable Income] - [Bracket or Exemption] ) x [%over] ) + [Bracket Tax or Base Tax]

When finding for the corresponding Bracket or Exemption and %over just look: - The row of your STATUS(ex. Single,Head of the Family,Married,and etc.)on the

table. - Then look for the greatest number that is less than to your Taxable Income(within the row of your STATUS).This is now your bracket or exemption. - After you found it,move your eyes vertically upward (on the tax table)and look for

your corresponding % over and Bracket Tax or Base Tax.