Philippines Tax ComputationWithholding Tax Computation

3/16/2014 Philippines Tax ComputationWithholding Tax Computation

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Sunday, June 28, 2009

2009 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.

Status OLD Tax Law NEW Tax Law

Single P20,000 P50,000

Head of The Family P25,000 P50,000

Married P32,000 P50,000

Additional Deductionfor Every QualifiedDependents

P8,000 P25,000

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 livingwith the taxpayer and not more than 21 years old, unmarried and not employed.

New Tax Table For January 2009

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2009 Philippines

Tax Computation

Tax Computation

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Posted by sports-broadcaster at 11:48 PM 41 comments

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/monetaryvalue 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?

Before starting,it is very important first to have a calculator with you. Simple Calculator

With your Monthly Basic Pay(Salary) you can immediately know your contributions.Just refer to this tablebelow:



For SSS:

Suppose your monthly basic pay(salary) is P11,000.00 then by looking at the table above(under thecolumn of Range of Compensation) just find the range of compensation that includes P11,000.00 andsimply move your eyes horizontally and look for your corresponding SSS Contribution(under the maincolumn Social Security and sub-column EE or Employee Contribution).So what did you see? P366.70right?.

Now just try it on your own,suppose your monthly basic pay(salary)is P14,000.00 what is your SSSContribution? Answer:P466.70

Since you already know how to look for your SSS Contribution it is time for you now to know how muchis your employer's contribution counterpart.Again, find the Range of Compensation where youbelong,move your eyes horizontally, and just look under the main column Social Security and sub-column ER or Employer Contribution.

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

If your monthly basic pay (salary) is P14,000, what is your employer contribution?your totalcontribution? Answer: ER= P989.30 ; TC= P1456.00



For Philhealth:

Illustration:

For instance you have a monthly basic pay (salary) of P11,000, then your Philhealth MonthlyContribution would be P137.50. How did I get this figure?It is simple,just look for the column underMonthly Salary Range and find for the interval where your salary belongs. After that, move your eyeshorizontally(to the right) and find for the corresponding Philhealth Monthly Contribution under theEmployee's Share Column.Got that???It is easy right?Now, take your try.

Example my gross basic pay (salary) is P14,000.00,how much is my Philhealth Monthly Contribution?Answer:P175.00

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 thatcorresponds to your monthly gross income.If your monthly gross income is P11ooo.00 then yourEmployer's Share is P137.50 and the total amount that debit in your Philhealth Contribution isP275.00 (Employee's Share + Employer's Share).

For HDMF/Pag-Ibig Contribution:



Illustration:

If your Monthly Basic Pay (Salary) is P11,000 then your HDMF Contribution is P11,000.00 X .02 =P220 and your Employer's Counterpart is P11,000.00 X .02 = P220 . This computation is soeasy.After you know where your Gross Monthly Salary Range belong just multiply it by theMULTIPLIER that corresponds to your monthly basic pay (salary) .The total monthly contribution thatdebit in your HDMF Contribution is P440.00 monthly.

Note: You can also demand to your Finance Officer or Human Resource Officer if you want to increaseyour HDMF Monthly Contribution.Why should you do that?These are the reasons:

If you want to avail a housing loan. (The bigger contribution you have the bigger the money lateron that you can loan for your housing loan.

To reduced your monthly withholding tax. Even the difference is minimal still it is an advantage toyour part.Why let the government get your money and can't even avail the priviledges.It is betterto invest your money in HDMF than letting it see in the "trust" fund of our government.NOTE: Ifyou increase your HDMF Contribution you will reduce the tax that the government get fromyou and at the same time you are investing it to have a better house that you will ownsomeday.

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

You need this later on when you compute your withholding tax because these are not taxable. Failure tonote 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+NightDifferential] - (minus) [Tardiness Deduction+Allowances+SSS Contribution+PhilhealthContribution,HDMF Contribution]

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

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

Factors that increases your tax:

Overtime PayHoliday PayNight Differential

Factors that decreases your tax:

Late/TardinessAllowancesSSS ContributionPhilhealth ContributionHDMF ContributionPersonal Exemptions (ex. single, head of the family, head of the family with qualifieddependents,etc)



6.You must have a copy of BIR Tax Table

New Tax Table For January 2009

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 orBase Tax]

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

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

Parts of Tax Table

Bracket or Exemption%overBracket Tax or Base Tax



Illustration:

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

Corresponding Bracket or Exem ption:P6,667 .00 Corresponding %over: 15% or.15 Corresponding Bracket T ax or Base T ax: P208.33

Question: Why did I use the amount P6,667.00 as the Bracket or Exemption for the taxableincome of P8,558? Why not P5,000 with a %over of 10% or P4,167 with a %over of 5%?Do youknow why?

Answer: Of course there is a way on finding your corresponding Bracket or Exemption and %overgiven your Taxable Income but I will not introduce it here since it is a long process that requires yourarithmetic skills.I am just considerate for those who are poor in Math. Anyway, I will still share myprecious trick that I am sure you will all understand it in an easy and direct way. I am 100% sure of thisnumber trick since I already tested it a thousand times.It is better to understand it if I will show a seriesof examples. Here are they:

When finding for the corresponding Bracket or Exemption and %over just look:

1. The row of your STATUS(ex. Single,Head of the Family,Married,and etc.)on the table.2. 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.3. 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.

Example 1:

Given:

Assuming Withholding Tax Computed Monthly Taxable Income: P8558.00 Status: Single(S)

Answer:

Corresponding Bracket or Exem ption:P6,667 .00 Corresponding %over: 15% or.15 Corresponding Bracket T ax or Base T ax: P208.33



Com puting Your Withholding T ax:

Withholding T ax = ( ([T axable Incom e] - [Bracket or Exem ption] ) x [%over] ) + [Bracket T ax orBase T ax]

Withholding T ax =[(P8558.00-P6,667 .00) X .15] + P208.33 Withholding Tax =P491.98

Example 2:

Given:

Assuming Withholding Tax Computed Monthly Taxable Income: P12,540.00 Status: Single or Married with 1 Qualified Dependent (S1 or M1)

Answer:

Corresponding Bracket or Exemption:P12,083.00 Corresponding %over: 20% or.20 Corresponding Bracket Tax or Base Tax: P708.33

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

Withholding Tax =[(P12,540.00-P12,083.00) X .20] + P708.33

Withholding Tax = P799.73

Example 3:

Given:

Assuming Withholding Tax Computed Monthly Gross or Basic Income: P11,000.00 Monthly Transportation Allowance:P500.00 Monthly Rice allowance:P500.00 Late/Tardiness:2hrs Overtime: 4 hrs (regular day) HDMF /Pag-Ibig Contribution: P300.00 Status: Married with 2 Qualified Dependents (M2) Days of Duty:22 days (8hrs per day)

Problem: How much is your monthly withholding tax given the information above?

Solution:

a.With your Gross or Basic Income totaling to P11,000.oo you can directly compute for your SSS andPhilhealth Contribution. By looking on the SSS and Philhealth tables above your respective contributionsare as follows:

SSS Contribution:P366.70 Philhealth Contribution:P137.50



b.Computing for the corresponding value of late/tardiness and overtime pay Given your grossmonthly salary of P11,000.00 then the monetary value of your late/tardiness is:

Total Number of Hours Worked: 22 X 8 = 176 hours

Rate Per Hour: P11,000.00 /(divided by) 176 = P62.5

The Monetary Value of Late/Tardiness: 62.5 X 2 = P125.00

Given your gross monthly salary of P11,000.00 then the monetary value of the overtime is:

Note: The overtime pay per hour for regular day is 125% (1.25)of your hourly rate

Overtime Rate Per Hour: 62.5 X (1.25) = P78.125

Total Overtime Pay: P78.125 X 4hrs = P312.5

c.Solving For Taxable Income.(I skip this process in my two previous examples since the taxableincome is already given but in this example the given is gross or basic salary instead of taxable income.General Formula:

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

Taxable Income=[ P11,000.00 + P312.5 ] - [ P125.00 + P500.00 + P500.00 + P300.00 + P366.70 + P137.50]

Taxable Income= [11,312.5]-[1929.2]

Taxable Income= P 9383.3

d.Solving for the corresponding withholding tax.

Corresponding Bracket or Exemption:P9167.00 Corresponding %over: 10% Corresponding Bracket Tax or Base Tax: P41.67

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

Withholding Tax = ( ([P9383.3] - [P9167.00] ) x [.10] ) + [41.67]

Withholding Tax=P63.3

It is very easy right? By just simply following the 8 easy steps above you are now ready to check if yourfinance/payroll officer miscalculated your tax. Always remember you don't need to be an accountant nora mathematically inclined person just to solve your withholding tax, all you need is simply following theseeight easy steps.



Posted by sports-broadcaster at 11:40 PM 55 comments

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